Berkshire Hathaway Inc., the investment holding company headed by Warren Buffett, has agreed to exercise all of its warrants to purchase common shares of Bermuda-based White Mountains Insurance Group Ltd., giving it a 16 percent stake in the company.
Berkshire will pay around $294 million in cash to acquire the 1,724,200 of the outstanding common shares in White Mountains. The exercise is subject to the expiration or termination of the Hart-Scott-Rodino waiting period.
White Mountains’ president and CEO Ray Barrette commented: “We are pleased that Warren Buffett has agreed to exercise the warrants a year ahead of schedule for a modest discount. This is a strong endorsement of the progress we have made since the OneBeacon acquisition in June 2001. We see many opportunities to put this capital to work for the benefit of all shareholders.”
The company’s announcement noted that “Berkshire Hathaway bought the warrants in connection with the financing of White Mountains’ acquisition of OneBeacon in 2001. The warrants were exercisable at any time until May 2008 and callable by the Company on or after May 31, 2005. Berkshire Hathaway and the Company agreed to reduce the exercise price by approximately 2 percent. As a result of the discount, the exercise of the warrants will have a small impact on fully converted tangible book value per share.”
Berkshire has thus further increased its investment in the insurance industry. It already controls GEICO, General Re and National Indemnity as well as other insurance related investments, including the $1.35 billion acquisition of Safeco’s life and investment operations, which it entered into in March as part of a group, which also included White Mountains.
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