Warren Buffett said Berkshire Hathaway Inc. (BRKA, BRKB) wasn't
willing to pay more than book value to acquire the 19.9% of Wesco
Financial Corp. (WSC) it doesn't already own, saying such a move
would be disadvantageous to shareholders.
In a January letter sent to a Wesco committee, Buffett said the
$387-a-share offer, which is about equal to Wesco's book value, was
"the maximum amount that Berkshire will pay for the minority
shares."
He added that even at the price, Berkshire regarded the
transaction as "disadvantageous" if a substantial number of Wesco
shareholders elected to take Berkshire stock.
Buffett reasoned that prospects for Berkshire shares over the
next 10 years are "considerably better" than prospects for Wesco's
shares, considering the economic prospects of the businesses each
of the companies owns.
Wesco, like Berkshire, is composed of several business that
operate with a large degree of independence.
Buffett was responding to a letter written by a Wesco committee,
which alleged the price understated the company's value. The Wesco
committee eventually accepted Buffett's offer, and the parties
announced the agreement in early February.
Under the terms of the $548 million deal, Wesco shareholders can
elect to receive cash, stock, or a combination of both--though the
price will change based on gains or losses in Wesco's investment
portfolio, the amount of time it takes to complete the deal and
other factors.
Berkshire's Class B shares closed down 46 cents to $85.04, while
Wesco was up 2 cents to $389.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com