Berkshire merger tax-free
|
|
December 17, 1998: 2:15 p.m. ET
Buffett's investment vehicle gets tax-free status for $22B General Re merger
|
NEW YORK (CNNfn) - Wall Street investment mogul Warren Buffett got a green light from the Internal Revenue Service on Thursday to proceed with a tax-free merger of the anchor of his insurance empire, Berkshire Hathaway Inc., with reinsurance giant General Re Corp.
Under terms of the merger, agreed on June 19, General Re shareholders can elect to receive either 0.0035 Class A Berkshire shares or 0.105 Class B shares for each share of General Re common stock.
The deal values each General Re (GRN) share at $276.50 , for a total transaction price-tag of $22 billion. Berkshire will account for the merger as a purchase.
After the transaction closes, shareholders of the Stamford, Conn.-based General Re, the parent company of General Reinsurance Corp. and the National Reinsurance Corp, the largest professional property-casualty insurance group in the United States, would own 18 percent of Berkshire Hathaway.
General Re has granted Berkshire Hathaway (BRK.A) and (BRK.B) options to purchase under certain conditions up to 19.9 percent of General Re's outstanding shares at the transaction price, subject to a cash limit of 3 percent of the deal's total value.
Berkshire Hathaway said the favorable tax ruling from the IRS Thursday paved the way for the completion of the acquisition after the close of New York trading on December 21.
As a result of the deal, General Re - which paid a third-quarter dividend of 59 cents a share on Sept. 30 - won't pay a fourth-quarter dividend.
Berkshire Hathaway, Buffett's Omaha, Neb.-based investment vehicle, operates property/casualty insurance and reinsurance businesses through subsidiaries that include National Indemnity and GEICO. The company has also amassed significant minority stakes in firms such as American Express, Coca-Cola, Gillette, Walt Disney, The Washington Post Co., and Wells Fargo.
Berkshire reported sales of $10.4 billion in 1997.
General Re, the largest reinsurer in the United States, posted revenues of $8.25 billion last year.
Class A shares of Berkshire Hathaway were off 2,475 points, or 3.9 percent, at 61,000 on the The New York Stock Exchange Thursday, while class B shares traded down 81-7/8, or 3.87 percent, at 2,035-1/8.
General Re stock was down 8-1/4, or 3.77 percent, at 210-3/4.
|
|
|
|
|
|