- Warren Buffett’s contempt for investment bankers has led to a low takeover bid for Alleghany shareholders.
- Buffett offered Alleghany $ 850 per share, minus any investment bank charges the insurance company could incur.
- The end result was a bid price of $ 848.02, about $ 27 million less than Buffett proposed.
Warren Buffett has never had a favorable view of investment banking, and this was fully demonstrated with Berkshire Hathaway’s takeover of Alleghany.
Berkshire has agreed to buy the insurance company $ 11.6 billion in cash, or $ 848.02 per share. But according to SEC reports, the current takeover agreement is for $ 850 per share, less any investment bank charges that Alleghany incurs during the deal-making process.
“Any share issued and awarded immediately before the effective time is canceled and canceled and converted into the right to receive $ 848.02 in cash, representing $ 850.00 per share less the financial advisory fee due to the financial advisor in connection with the merger , “the SEC Areeche said.
Bloomberg reported that Buffett had specifically warned Alleghany that he did not want Berkshire to pay the bill for his investment bank charges, quoting a person with knowledge of the matter. The end result is Buffett subtracting $ 27 million, or the fee Alleghany Goldman Sachs pays to be his adviser during the deal, from the takeover bid.
Buffett’s view of investment banking was set out in Berkshire Hathaway’s 2014 annual letter to investors, in which he said: “Money shufflers do not come cheap.”
“Many mouths with expensive tastes then call for being fed – including investment bankers, accountants, advisors, lawyers and such capital real estate agents as leveraged buyout operators,” Buffett added in the letter, published in 2015.
Buffett himself often makes acquisitions for Berkshire Hathaway without the use of an investment bank. Instead, the conglomerate relied on former Berkshire Vice President Charlie Munger’s law firm for advice on deals.
But there’s one investment banker Buffett has no problem paying, and that’s former Goldman Sachs Managing Director Byron Trott. Buffett relied on Trott when Berkshire bought Walmart’s food distributor McLane in 2003 for about $ 1.5 billion.
“I should add that Byron has now been instrumental in three Berkshire acquisitions. He understands Berkshire much better than any investment banker we have spoken to and – it hurts me to say this – deserves his credit,” Buffett said in his Berkshire letter. 2003. which was published in 2004.
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