Berkshire said it will pay $848.02 per share in cash for Alleghany, representing a 25.3 percent premium over Friday's closing price of $676.75 and a multiple of 1.26 times the New York company's book value at the end of 2021.
Berkshire Hathaway, an Omaha, Nebraska-based conglomerate with vast insurance operations that include Geico, said it expects to complete the acquisition by the end of the year.
Mr. Buffett's company, which also owns a massive stock portfolio as well as railroad, energy, and consumer businesses, made no large acquisitions in 2021 and ended the year with $146.7 billion in cash, cash equivalents, and short-term Treasury bills.
Alleghany is best known for its core property and casualty insurance businesses, but it has also amassed a diverse group of increasingly profitable noninsurance divisions, earning it comparisons to a mini-Berkshire Hathaway.
Joseph Brandon, who led Berkshire Hathaway's General Re division from 2001 to 2008, was named CEO of Alleghany in January.
"Berkshire will be the ideal permanent home for Alleghany, a company I have closely observed for the past 60 years," Mr. Buffett said on Monday. "Over the course of 85 years, the Kirby family has built a business that bears many similarities to Berkshire Hathaway. I'm especially excited to be able to collaborate with my long-time friend, Joe Brandon."
Berkshire said the deal includes a 25-day "go-shop" period during which Alleghany can seek a better offer, and that Alleghany and its units will continue to operate as an independent entity after the transaction closes, with increased capital strength and Berkshire support.