Tags: US | Berkshire | Hathaway | Wesco | Financial

Berkshire Offers to Buy Rest of Munger's Wesco Unit

Thursday, 26 Aug 2010 01:12 PM

Warren Buffett's Berkshire Hathaway Inc. announced plans to buy the 19.9 percent it does not own of Wesco Financial Corp., a company run by Berkshire Vice Chairman Charlie Munger.

The transaction would be valued at about $460 million, based on Wesco's closing stock price on Wednesday and reported shares outstanding.

Shares of Wesco rose as much as 18.9 percent after Berkshire announced the offer in a Thursday regulatory filing.

Based in Pasadena, Calif., Wesco has three main businesses: insurance, through its Wesco-Financial Insurance Co and Kansas Bankers Surety Co units; furniture rental, through its Cort Business Services Corp unit; and steel, through its Precision Steel Warehouse Inc unit.

Berkshire acquired its 80.1 percent stake in Wesco more than 30 years ago. Munger, 86, has been Wesco's chairman and chief executive since 1984, and Berkshire's vice chairman since 1978. Buffett turns 80 on Monday.

"I welcome the news," said Frank Betz, a principal at Carret/Zane Capital Management LLP, which invests $800 million and owns Berkshire stock.

"The more commitments Buffett can make to put Berkshire on autopilot for after his departure leaves the company in better shape for its shareholders," Betz went on. "Buffett also has an ongoing problem with deploying all of Berkshire's cash."

Wesco and Berkshire did not immediately return calls for comment. Berkshire ended June with $27.95 billion of cash.

In Thursday's filing, Omaha, Neb.-based Berkshire said it decided on Aug. 25 to propose a takeover, in which it would swap Class B shares or cash valued at Wesco's book value per share in exchange for Wesco stock.

Buffett last used Class B shares in an acquisition in February, when Berkshire paid $26.5 billion to buy the railroad company Burlington Northern Santa Fe Corp.

Bill Gates, Microsoft Corp. co-founder and Berkshire director, owns 1.26 percent of Wesco shares, Thursday's filing said.

The Wesco transaction requires several approvals, including by the companies' boards and by a majority of Wesco shares not owned by Berkshire.

From January to June, Wesco posted a $43.6 million profit on revenue of $388.9 million, another regulatory filing shows.

In afternoon trading, Wesco shares were up $41.25, or 12.7 percent, at $366.00 on the American Stock Exchange. Berkshire Class A shares fell $89 to $115,017 on the New York Stock Exchange, and its Class B shares fell 8 cents to $76.72.

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Warren Buffett's Berkshire Hathaway Inc. announced plans to buy the 19.9 percent it does not own of Wesco Financial Corp., a company run by Berkshire Vice Chairman Charlie Munger. The transaction would be valued at about $460 million, based on Wesco's closing stock price...
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2010-12-26
Thursday, 26 Aug 2010 01:12 PM
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