NEW YORK—Warren Buffett’s Berkshire Hathaway Inc. on Monday struck an agreement to buy insurance company Alleghany Corp. for $11.6 billion, only weeks after the 91-year-old billionaire bemoaned a lack of good investment opportunities.
Alleghany, the owner of reinsurer Transatlantic Holdings Inc., would expand Berkshire’s large portfolio of insurers, which includes auto insurer Geico, reinsurer General Re, and a unit that insures against major catastrophes and unusual risks.
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Buffett, who has run Berkshire since 1965, said in a statement.
The acquisition, one of the five largest in Berkshire’s history, would reunite Buffett with Joseph Brandon, who led General Re from 2001 to 2008 and became Alleghany’s chief executive in December.
It would also end Buffett’s six-year drought of large acquisitions and help him to deploy some of the $146.7 billion of cash and equivalents his conglomerate had at the end of last year.
In his Feb. 26 annual shareholder letter, Buffett lamented that “internal opportunities deliver far better returns than acquisitions” and that little “excites us” in equity markets. He pledged to keep $30 billion cash on hand.
Cathy Seifert, an analyst at CFRA Research in New York, said the merger should offer no surprises, reflecting Buffett’s familiarity with Alleghany and Brandon.
“Berkshire has been under pressure to do a deal, and this may be the path of least resistance, though Alleghany will be a positive addition,” she said.
“In terms of its business model and culture, this is a very strong fit.”
Berkshire agreed to pay $848.02 in cash per Alleghany share, representing a 25 percent premium over Friday’s closing price.
