Berkshire Hathaway agrees $11.6bn Alleghany acquisition

BY Richard Summerfield

Berkshire Hathaway has agreed to acquire insurance firm Alleghany Inc in a deal worth $11.6bn. The acquisition, upon completion, would be one of the five largest deals in Berkshire’s history and will put some of the firm’s $146.7bn of cash and equivalents to work after a nearly six year wait for a large deal.

The all-cash acquisition of Alleghany will expand Berkshire’s already considerable insurance holdings, including brands like Geico auto insurance. Alleghany’s core businesses are property and casualty reinsurance and insurance.

Under the terms of the deal, Berkshire will pay $848.02 in cash for each outstanding share of Alleghany. The price represents a 25 percent premium over Friday’s closing price, the last day of trading before the deal was announced.

Upon completion, which is expected in the fourth quarter of 2022, pending regulatory and Alleghany shareholder approvals, Alleghany will operate as an independent unit of Berkshire. The company has 25 days to actively solicit and consider alternative acquisition proposals under a ‘go-shop’ provision.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” said Warren Buffett, chairman and chief executive of Berkshire Hathaway. “Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway. I am particularly delighted that I will once again work together with my long-time friend, Joe Brandon.”

“My family and I have been significant shareholders of Alleghany for over 85 years and are proud that our ownership will culminate through this compelling transaction with Berkshire Hathaway,” said Jefferson W. Kirby, chair of the Alleghany board of directors. “Not only does this deal provide substantial and certain value to stockholders, but it provides a rare opportunity to join forces with a like-minded and highly respected investor and business leader. Berkshire Hathaway’s support, resources, and expertise will provide added benefits and opportunities for Alleghany and its operating businesses for many years to come.”

“This is a terrific transaction for Alleghany’s owners, businesses, customers, and employees,” said Joseph P. Brandon, president and chief executive of Alleghany. “The value of this transaction reflects the quality of our franchises and is the product of the hard work, persistence, and determination of the Alleghany team over decades. As part of Berkshire Hathaway, which epitomizes our long-term management philosophy, each of Alleghany’s businesses will be exceptionally well positioned to serve its clients and achieve its full potential.”

News: Buffett ends drought with $11.6 bln Alleghany purchase

Amazon’s $8.5bn MGM deal inches closer with EU antitrust approval

BY Richard Summerfield

The European Union’s (EU’s) antitrust regulator unconditionally approved Amazon’s proposed $8.5bn acquisition of US movie studio MGM, in part because “MGM’s content cannot be considered as must-have”. The deal is still pending approval by the US Federal Trade Commission (FTC), which has a mid-March deadline to decide on the deal. If the FTC does not file a legal challenge before the deadline, Amazon can move forward with the acquisition.

The EU competition regulator, the European Commission (EC), said it had looked into overlaps between Amazon and MGM in audio-visual content and found that the combined market shares are low and that they have strong rivals. “The addition of MGM’s content into Amazon’s Prime Video offer would not have a significant impact on Amazon’s position as provider of marketplace services,” the Commission said in a statement.

“The parties are primarily active in different parts of the AV content value chain and where both parties are active, their combined market shares are low,” the EC added. It also found that MGM’s upstream activities as a producer and licensor of film and TV content “are limited compared to other market players’ activities”.

“We’re pleased with the Commission’s decision and, with MGM, look forward to providing more choice of quality entertainment for viewers,” said an Amazon spokesperson. Interestingly, the EC has previously filed charges against Amazon for its use of vendor data to compete with third-party sellers on its online retail platform.

The deal for MGM, which was founded in 1924, was announced in May 2021. It stands to bring Amazon a catalogue of more than 4000 movies, including James Bond, one of the most lucrative franchises in film history with nearly $7bn in global box office earnings, and 17,000 TV programmes. The EC said the “addition of MGM’s content into Amazon’s Prime Video offer would not have a significant impact on Amazon’s position as provider of marketplace services”.

The competition in the global streaming market is intensifying. Amazon Prime passed 200 million subscribers last year, and the company said 175 million of those paying members also streamed Prime Video content. Market leader Netflix has 222 million subscribers, while the soon to be combined Discovery+ and HBO Max will have around 96 million subscribers.

News: Amazon wins EU antitrust nod for $8.5 bln MGM deal

Rio Tinto proposes $2.7m bid to acquire Turquoise Hill

BY Fraser Tennant

In a move that would significantly strengthen its copper portfolio, Anglo-Australian mining group Rio Tinto has offered to buy the 49 percent of Canadian mineral exploration and development company Turquoise Hill it does not already own – a proposal that values the shares at $2.7bn

Under the terms of the non-binding proposal, Turquoise Hill minority shareholders would receive $34 in cash per Turquoise Hill share, representing a premium of 32 percent to Turquoise Hill’s last closing share price on the Toronto Stock Exchange.

Founded in 1995, Turquoise Hill is an international mining company focused on the operation and continued development of the Oyu Tolgoi copper-gold mine in Mongolia, the company's principal and only material mineral resource property.

The proposed transaction follows the recent comprehensive agreement reached between Rio Tinto, Turquoise Hill and the government of Mongolia to move the Oyu Tolgoi project forward – resetting the relationship between the partners and approving commencement of underground operations.

If the acquisition proves successful, Rio Tinto will hold a 66 percent interest in Oyu Tolgoi, with the remaining 34 percent owned by Mongolia.

“Rio Tinto strongly believes in the long term success of Oyu Tolgoi and Mongolia, and delivering for all stakeholders over the long-term,” said Jakob Stausholm, chief executive of Rio Tinto. “That is why we want to increase our interest in Oyu Tolgoi, simplify the ownership structure and further strengthen Rio Tinto’s copper portfolio.

“Furthermore, an acquisition would enable Rio Tinto to work directly with the government of Mongolia to move the Oyu Tolgoi project forward with a simpler and more efficient ownership and governance structure,” he continued. “We believe the terms of proposal are compelling for Turquoise Hill shareholders.”

To progress the proposal, Turquoise Hill’s board of directors will be establishing a special committee of independent directors to review and consider Rio Tinto's offer. Turquoise Hill shareholders are not required to take any action at this time.

Mr Stausholm concluded: “With our relationship reset and underground operations commenced, this transaction demonstrates our clear and unequivocal long-term commitment to Mongolia.”

News: Rio Tinto offers $2.7 bln to buy rest of Turquoise Hill stake

Cyber intelligence: Google acquires Mandiant in $5.4bn deal

BY Fraser Tennant

At a time when security has never been more important, Google LLC is to acquire cyber security firm Mandiant, Inc. in a deal valued at approximately $5.4bn – adding Google speed and scale to Mandiant’s unparalleled intelligence and expertise.

Under the terms of the definitive agreement, Mandiant will be acquired by Google for $23 per share in an all-cash transaction expected to close later this year.

Upon close of the acquisition, Mandiant will join Google Cloud. With security the cornerstone of its commitment to customers and users around the world, Google Cloud builds cloud-native security into the foundation of its technology to block malware, phishing attempts and potential cyber attacks at scale.

Moreover, the acquisition of Mandiant underscores Google Cloud’s commitment to advancing its security offerings to better protect and advise customers across their on-premise and cloud environments and stay protected at every stage of the security lifecycle.

“The Mandiant brand is synonymous with unmatched insights for organisations seeking to keep themselves secure in a constantly changing environment,” said Thomas Kurian, chief executive of Google Cloud. “This is an opportunity to deliver an end-to-end security operations suite and extend one of the best consulting organisations in the world.”

Founded in 2004, Mandiant’s more than 600 consultants currently respond to thousands of security breaches each year. Paired with research from more than 300 intelligence analysts, these resulting insights are what power Mandiant’s cyber defence solutions.

“Cyber security is a mission, and we believe it is one of the most important of our generation,” said Kevin Mandia, chief executive of Mandiant. “Google Cloud shares our mission-driven culture to bring security to every organisation and these efforts will help them to effectively, efficiently and continuously manage and configure a complex mix of security products.”

The transaction is subject to customary closing conditions, including the receipt of Mandiant stockholder and regulatory approvals.

Mr Kurlan concluded: “Together, Google and Mandiant can make a profound impact in securing the cloud, accelerating the adoption of cloud computing, and ultimately make the world safer.”

News: Google boosts cloud security with $5.4 billion Mandiant deal

AGL bats away Brookfield bid

BY Richard Summerfield

AGL Energy has rejected an unsolicited, sweetened $4bn takeover offer from tech billionaire Mike Cannon-Brookes of Grok Ventures and Canadian investment management firm Brookfield Asset Management. The offer, according to AGL, undervalued the company.

“The AGL Energy Board considers that the Revised Unsolicited Proposal is still well below both the fair value of the company on a change of control basis and relative to the expected value of the proposed demerger, and therefore is not in the best interests of AGL Energy shareholders,” noted AGL in a statement.

The revised proposal was for A$8.25 a share, a 15 percent premium to AGL’s share price on 18 February. The first proposal from the Brookfield-led consortium would have seen AGL shareholders receive A$7.50 per share.

“The revised unsolicited proposal continues to ignore the opportunity that AGL Energy shareholders have through our proposed demerger to realise potential future value,” said Peter Botten, chairman of AGL Energy. “It also ignores the momentum we have recently seen in the business through our solid half-year result, strong progress on the demerger, strong interest in our Energy Transition Investment Partnership and the improvements we are seeing in forward wholesale prices.”

The consortium’s proposal to spend between A$10bn and A$20bn in large-scale renewable energy and batteries to enable the early closures of AGL’s power stations that account for 8 percent of Australia’s overall greenhouse gas emissions “would have been the world’s biggest decarbonisation project”, according to Mr Cannon-Brookes. In response to AGL’s rejection of the offer, Mr Cannon-Brookes tweeted that the “Brookfield-Grok consortium looking to take private & transform AGL is putting our pens down, with great sadness”.

AGL owns three large coal plants, some gas and renewable assets, and one of Australia’s biggest energy retail business, with more than 4 million customers, according to its 2021 annual report.

Last year, AGL proposed splitting the company into separate publicly traded companies — AGL Australia and Accel Energy — aiming to cut greenhouse gas emissions by as much as 60 percent by 2034. The move would split the company’s retail and coal generation businesses to operate them as two separate divisions. The demerger is progressing well and on track for completion by June this year, the company said last month.

News: Australia's AGL Energy rebuffs sweetened $4 bln bid from Brookfield-led team