Warren Buffett’s Berkshire Hathaway Inc. will sell its 16.3 percent stake in White Mountains Insurance Group Ltd. in a transaction valued at $836 million, seven years after investing in the Bermuda-based insurer, White Mountains said Monday.
Berkshire will exchange its 1.724 million shares for about $751 million of cash plus a unit that holds two businesses, Commercial Casualty Insurance Co. and International American Group Inc., with $435 million of assets and $58 million of adjusted shareholder equity, White Mountains said. The transaction is valued at $485 per share, it said.
Ray Barrette, White Mountains’ chief executive, said the agreement lets the Hamilton-based company exit businesses with potentially volatile reserves, use capital more efficiently and redeem stock at a small premium to book value. White Mountains would have about 8.8 million shares after the transaction.
Berkshire, an insurance and investment company, invested $300 million in White Mountains in 2001, when the latter paid about $2.2 billion for the U.S. property and casualty operations of Britain’s CGNU Group.
Buffett had been a long-time friend of Jack Byrne, who was White Mountains’ chief executive at the time. Byrne is credited with improving the fortunes of auto insurer Geico Corp in the 1970s, with Buffett as an investor. Berkshire now owns Geico.
Barrette said “all shareholders benefited handsomely from the relationship” with Omaha, Nebraska-based Berkshire. “White Mountains is now a larger, more diversified business, competing actively in many areas with Berkshire Hathaway. This is a graceful, value-enhancing way to go our separate ways.”
Berkshire did not immediately return a request for comment.
White Mountains said the transaction is structured so that neither it nor Berkshire realizes a taxable gain from the exchange. It said the transaction requires regulatory approvals and a ruling from the U.S. Internal Revenue Service.
Shares of White Mountains closed Friday at $478.
(Reporting by Jonathan Stempel; Editing by Derek Caney and Dave Zimmerman)