Warren Buffett, who started the year bemoaning the lack of potential acquisitions for his conglomerate, Berkshire Hathaway, announced Monday that it would acquire the insurance company Alleghany for $11.6 billion.
The scarcity of investment targets last year turned into a cash pile of more than $144 billion at Berkshire Hathaway by the end of 2021, but the company appears to have found a suitable place for some of that cash in recent days.
The Omaha, Nebraska, company revealed last week that it had compiled a 14.6 stake in the oil producer Occidental Petroleum, snapping up an additional $1 billion worth of shares just between Monday and Wednesday.
The all-cash acquisition of Alleghany will expand Berkshire’s already considerable insurance holdings, including brands like Geico auto insurance.
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years," Buffett said in a prepared statement Monday. "Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway."
Alleghany's core businesses are in property and casualty reinsurance and insurance.
Berkshire will pay $848.02 in cash for each outstanding share of Alleghany Corp., the company said Monday.
“Berkshire Hathaway’s support, resources, and expertise will provide added benefits and opportunities for Alleghany and its operating businesses for many years to come.” Alleghany Chair Jefferson Kirby said.
Alleghany, based in New York City, will operate as an independent subsidiary of Berkshire Hathaway after the transaction's closing. It has 25 days to actively solicit and consider alternative acquisition proposals under a “go-shop" provision.
The aannouncement comes after Buffett said last month in his annual letter to company investors that he was having difficulty finding worthwhile acquisitions with the valuations on companies soaring.
Yet Berkshire made sizeable investments in Occidental just as the price of oil began to spike, bringing along the shares of oil producers with it. Benchmark U.S. crude had jumped more than 40% this year with its rise accelerated by Russia's invasion of Ukraine.
Shares of Occidental have almost doubled in the same period.
The boards of both Allegheny and Berkshire have approved the deal and it's expected to close in the fourth quarter. It still needs approval from Alleghany shareholders.