Warren Buffet just disclosed his largest deal since 2016

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Warren Buffet is buying Alleghany Corporation (NYSE: Y) for $11.60 billion – an announcement that sent shares of the insurance company up 25% on Monday.

A 25% premium for Alleghany shareholders

The $848.02 a share cash deal represents a 25% premium for Alleghany stockholders. Buffet will execute the transaction via his conglomerate holding company Berkshire Hathaway Inc (NYSE: BRK.A) that’s sitting on $144 billion in cash.

Alleghany will be the largest acquisition for Berkshire since 2016, when it bought Precision Castparts for $37 billion. According to Alleghany CEO Joseph Brandon said:

It’s a terrific transaction for Alleghany’s owners, businesses, customers, and employees. The value of this transaction reflects the quality of our franchises and is the product of the hard work, persistence, and determination of the Alleghany team over decades.

Jim Cramer reacts to the announcement

Alleghany and its businesses will operate independently upon completion of the acquisition, expected in the fourth quarter of 2022. Commenting on the news, CNBC’s Jim Cramer said on “Squawk on the Street”:

It does matter because we’ve been very concerned about this new FTC and we thought maybe M&A was over. But this under the radar screams deal, I think passes. Insurance is a terrific business if you know how to do it.

The announcement comes only days after Berkshire stock hit a record high. Insurance is one of Buffet’s favourite businesses; he already owns notable names in this space, including General Re and Geico.  

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