Alleghany Shareholder Aims to Halt Berkshire’s $11.6 Billion Acquisition of the Company

Alleghany Corp., a New York-based insurance company, was acquired by Warren Buffet’s Berkshire Hathaway Inc. in March. Soon after the deal was finalized, an Alleghany shareholder sued the insurance company, claiming that it provided incomplete and inadequate disclosures about the $11.6 billion takeover, according to Reuters.

The complaint was filed in the United States District Court for the Southern District of New York. The plaintiff, Shiva Stein, an Alleghany shareholder, argues that Alleghany did not decipher the financial rationale for the “fairness opinion” issued by the bankers at Goldman Sachs who assessed whether the deal was fair for Alleghany stockholders, according to Reuters.

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According to Stein’s complaint, absent additional disclosures, “plaintiff will be unable to make a fully-informed decision regarding whether to vote in favor of the proposed transaction, and she is thus threatened with irreparable harm.”

Stein aims to halt Berkshire Hathaway’s acquisition of Alleghany until further financial disclosures regarding the deal are made. Stein has not, however, argued that the sale price for Alleghany is too low, according to Reuters.

Lawsuits like this by shareholders occur frequently. Shareholders often sue when they find the terms of an acquisition to be unfair or when disclosures seem incomplete. In April, Stein sued Mandiant Inc. to stop Alphabet Inc.’s Google from acquiring the cybersecurity company for $5.4 billion, according to Reuters. Stein again cited an alleged lack of financial disclosures to support another Goldman Sachs fairness opinion.

Regarding Berkshire’s acquisition of Alleghany, Goldman stated that Berkshire’s agreement to buy Alleghany for $848.02 per share, a 25% premium, was “fair from a financial point of view” to Alleghany shareholders, according to Reuters. If the deal goes through, Berkshire will expand its portfolio of insurers, which includes Geico and General Re, and Buffet will reunite with Alleghany Chief Executive Joseph Brandon, who was head of General Re from 2001 to 2008.