OMAHA, Neb. -- Berkshire Hathaway Inc., the investment vehicle of billionaire Warren E. Buffett, said yesterday that it will pay $22 billion in stock for General Re Corp., the largest U.S. reinsurance company, creating one of the largest reinsurers in -- the world.
The transaction values General Re at about $283.15 a share, or a 29 percent premium to its closing price of $220.25. General Re fell $3.875 in trading before the companies announced their merger.
Berkshire will trade 0.0035 of its Class A shares or 0.105 of its B shares for each share of the Stamford, Conn.-based General Re. Berkshire's A shares are worth $80,900, and its B shares are worth $2,705.
The acquisition would give Berkshire a company that had 1997 )) income from operations of almost $1 billion and consolidated net premiums of more than $6.5 billion. Berkshire will get another $24 billion in investments and General Re will be able to write its policies without worrying about fluctuations in its earnings or credit rating companies, Buffett said.
"The main attraction of the merger is synergy, a word that heretofore has never been used in listing the reasons for a Berkshire acquisition," Buffett said in a statement issued after the markets closed.
By selling to Berkshire, General Re will be part of a company with a market value of more than $120 billion -- bigger than Procter & Gamble Co.
General Re may have more opportunities to expand internationally with Berkshire than on its own, the Omaha billionaire said. It also will gain more flexibility in investing because it will have a steady flow of income and easy access to money as a Berkshire subsidiary, Buffett said.
Pub Date: 6/20/98