The “go shop” period ends this Thursday April 14.
Barring a last minute announcement, or I missed something, I guess it looks like the deal is going through.
Jim
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seems that way. Love Warren’s “these are my terms”
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The “go shop” period ends this Thursday April 14.
Barring a last minute announcement, or I missed something, I guess it looks like the deal is going through.
Yes, 2 more days. Of course, we don’t know whether anyone is doing due diligence as we speak, but the market seems to think that is getting unlikely. Shares have dropped down from about $852-$855 last week to $845 now (the takeover price is $848*), indicating that the market thinks the chance of a takeover at a price higher than $848 is small.
dtb
*It’s actually $850, not $848.02, now that I think about it. Yes, Berkshire will pay $848.02, but then will also pay the $27 million accounting fee to Goldman Sachs, which amounts to $1.98 per share, so the total cost is $850 per share. Buffett had offered $850 a share, no accounting fee, and Brandon (CEO of Alleghany) came back with a counter offer: Berkshire should increase its price, or pay the Goldman fee, or pay part of the transaction with Berkshire shares. Buffett chose a fourth option: pay the $1.98/share Goldman fee, but pay $1.98 less.
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Here is the story that is repeated at lots of sites:
…dinner in New York City on March 7, where after some “casual conversation” Buffett offered $850 per share in cash for the company, less the fee for bankers at Goldman Sachs.
Five days later, Brandon and Alleghany Chairman Jefferson Kirby met Buffett in Omaha, Nebraska, where Kirby asked Buffett to make a higher offer, pay Goldman’s $27 million fee, or use Berkshire stock to fund part of the purchase.
“Mr. Buffett reiterated the terms of his original offer, indicating firmly he did not intend to change his position on those points,” the filing said.
Berkshire, which is based in Omaha, ultimately agreed to pay $848.02 per share, with the $1.98 difference from $850 accounting for Goldman’s fee.
It’s a funny way to conclude, if you think about it. Buffett originally offered $850 per share, total, no fee, and wouldn’t budge on that price. The way it has been reported, Buffett refuses to pay that fee, but in fact, that’s not the case. In the end, Berkshire IS still paying the $850, but that is now $848.02 going to Alleghany shareholders, and $1.98 going to Goldman.
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That’s how savvy car buyers handle the phoney “doc fee” that car dealers try to stick them with.
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Love Warren’s “these are my terms”
Don’t forget Warren lost few deal over 5% or 10%.
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indicating that the market thinks the chance of a takeover at a price higher than $848 is small
No you are reading what you want to read. The speculators are betting for higher offer. The price is actually $849.37. If no offer is emerging by Thursday close, you will see a price drop on Monday, not much but few $.
“Don’t forget Warren lost few deal over 5% or 10%.”
10% really? Name one and the mechanics of the offer. My memory is lousy.
jk
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“Don’t forget Warren lost few deal over 5% or 10%.”
10% really? Name one and the mechanics of the offer. My memory is lousy.
jk
The funny thing is that Berkshire has already bid on and lost one of the major assets they are buying in Alleghany. Remember Berkshire offering $3.2 Billion for Transatlantic Holdings (parent of TransRe) in 2011? It was actually Ajit’s deal, I suspect he was helping out a friend at TransRe who didn’t want to become part of Validus (which was trying to take over Transatlantic at the time). Berkshire was outbid by another party, maybe it was Allied World, then that deal fell through or was outbid by Alleghany and Transatlantic ended up being purchased by Alleghany for $3.4 Billion.
So not only does it happen, but it has happened with some of these exact same assets before.
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Name one and the mechanics of the offer. My memory is lousy.
No it is not your memory that is lousy…
Absolutely, WEB and Berkshire missed many deals because of 5% and 10% and because WEB has a policy not to chase.
For Ex: Tech Data on 2019 (When he had over $100 B in the bank collecting dust), He countered Apollo’s bid with $140 and Apollo countered it with $145 and Berkshire walked away.
There were many other deals where Berkshire is rumored to be a bidder only to lose it to PE’s. PE’s know Buffett will not counter them and for a decade he could not do any meaningful deals because he routinely lost to PE’s.
Someone as smart & Ruthless as WEB, should know, he had to draw the line on sand and take the fight to PE’s on some deal, so that he doesn’t lose deals. Alas, WEB just didn’t have a fight in him, so he let cash accumulate and lose deals to PE’s for a decade.
A decade where Berkshire cash pile grew also witnessed PEs actively doing deals. It is just not stocks are pricey alone.
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Name one and the mechanics of the offer. My memory is lousy.
No it is not your memory that is lousy…
Absolutely, WEB and Berkshire missed many deals because of 5% and 10% and because WEB has a policy not to chase.
…
Someone as smart & Ruthless as WEB, should know, he had to draw the line on sand and take the fight to PE’s on some deal, so that he doesn’t lose deals. Alas, WEB just didn’t have a fight in him…
Or - maybe - he has spent a lifetime building absolute credibility, that his first offer will be his “best and highest”. If Berkshire “loses” deals, it is because somebody else is willing to pay more.
Imagine how the Allegheny negotiation would have gone, if Berkshire had a reputation for haggling, even occasionally! How many dozens of auctions would we witness each year?
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he has spent a lifetime building absolute credibility, that his first offer will be his “best and highest”
Don’t romanticize these things. No one is falling over their heels to do a deal with Berkshire or WEB.
Small mom and pop may want to sell to Berkshire, especially when they can continue to run their businesses and Berkshire allowed them to settle the estate for their offspring. The $10, $20, $30 Billion market cap companies are not your mom and pop and Berkshire is not the only game in the town.
Berkshire was/ is looking to invest and the companies are not looking particularly to sell to Berkshire. They are going to go with highest bidder. The CEO/ board has a fiduciary duty to get the best price. If “grandpa” Warren wants to do only handshake deals, then the result is going to be $100 B+ cash pile up.
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If “grandpa” Warren wants to do only handshake deals, then the result is going to be $100 B+ cash pile up.
And all the while, Grandpa has amassed a balance sheet that will shortly be north of $1 trillion in assets. Just saying.
jk
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No it is not your memory that is lousy…
I seem to recall that Buffett recounted an anecdote that BRK almost bought a large slug of WMT 20 years ago, but refrained from making the purchase because the prevailing stock price bumped up about one-eighth higher than what WEB wanted to pay.
I’ve been guilty of similar folly in anchoring to a particular buy-price for what I’ve assessed to be undervalued stocks. There’s nothing quite like the experience of being unwilling to pay a 0.1% higher price, and then to see the stock soar by 25% over the next 12 months.
SJ
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