Buffett, Brandon dinner quickly led to deal for Alleghany

A dinner between former colleagues rapidly turned into Berkshire Hathaway Inc.'s biggest insurance deal in decades.

Alleghany Corp. President and CEO Joseph Brandon on March 7 dined with Berkshire Chairman and CEO Warren Buffett in New York City at the latter's invitation. The two men once worked together when Brandon headed up Berkshire subsidiary General Re Corp. According to a regulatory filing, Buffett at the dinner said Berkshire was interested in buying Alleghany for about $850 per share.

Alleghany's board chairman, Jefferson Kirby, met with Buffett days later and asked him to increase the price. Kirby also asked if Berkshire stock could be used as part of the deal's consideration. Buffett declined and said he did not plan to change his position.

Alleghany's board later met and approved a deal that will see Berkshire buy all of the reinsurer's stock for $848.02 per share, representing a total equity value of about $11.6 billion. That marks one of the biggest deals announced across all industries in the first quarter and is the largest insurance deal Berkshire has struck since it agreed to buy General Re in June 1998.

The two sides executed the merger agreement and announced the deal on March 21.

The deal includes a "go-shop" provision that allows Alleghany seek out potentially superior proposals. With Goldman Sachs acting as representatives, the reinsurer has thus far contacted 23 potential strategic bidders and eight potential financial sponsor bidders, according to the filing.

The go-shop period wraps up at the end of the day on April 14.