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August 26, 2010 Thursday 5:16 PM EST
SECTION: NEWS & COMMENTARY
LENGTH: 515 words
HEADLINE: Berkshire offers to buy rest of Wesco Financial
BYLINE: Alistair Barr, MarketWatch mailto:ABarr@marketwatch.com.
Alistair Barr is a reporter for MarketWatch in San Francisco.
SAN FRANCISCO (MarketWatch) — Berkshire Hathaway Inc. said Thursday that it wants to buy the 19.9% of Wesco Financial Corp. that it doesn’t already own.
Chairman Warren Buffett is offering to pay a price equal to Wesco’s book value per share. Wesco stock jumped above the company’s most-recent reported book value per share, suggesting Buffett may need to pay more to get the deal done.
Berkshire (BRKA) (BRKB) said in a regulatory filing that it plans to offer to buy the rest of Wesco (WSC) .
Berkshire owns 80.1% of Pasadena, Calif.-based Wesco and has controlled a majority of its shares since the early 1980s. Berkshire Vice Chairman Charlie Munger is chief executive of Wesco. Berkshire said Thursday that it will offer cash and B-class shares for the remaining 19.9% of Wesco. Wesco operates Kansas Banks Surety, a specialized insurance company; CORT Business Services, a commercial furniture-rental business; and Precision Steel, a scrap-metal reseller.
Wesco shares jumped 12% to close at $363 after the announcement.
The offer will be valued at the book value per share of Wesco at a time close to the closing of a deal, Berkshire added.
“Approval from shareholders and the boards of both companies is required, but appears likely,” Bill Bergman, an equity analyst at Morningstar, wrote in a note to investors on Thursday. “We think the transaction price will be fair for shareholders of both Wesco and Berkshire.”
With Berkshire already owning most of Wesco’s shares, the deal is likely to be approved. However, securities laws in the U.S. are designed to protect the rights of minority shareholders in situations like this.
Tripp Levy, a law firm specializing in takeover litigation, said Thursday that it’s investigating whether the offer values Wesco properly.
At the end of June, Wesco said its book value was $2.51 billion, or $352.66 a share, according to the company’s latest quarterly regulatory filing.
Shares of Wesco traded above $400 earlier this year and the stock jumped over $360 in afternoon trading on Thursday.
“The investigation further concerns whether Berkshire, as the controlling shareholder of the company, as well as the board of directors of Wesco may have breached their fiduciary duties by not acting in Wesco shareholders’ best interests in connection with the sale process of Wesco,” Tripp Levy said in a statement.
Berkshire said Thursday that it would only proceed if the deal is approved by the board of directors of Berkshire and the board of directors of Wesco (including a majority of the independent directors), as well as by a majority of the shares of Wesco not owned by Berkshire voted at any meeting that may be called to consider the transaction.
“If no transaction is agreed upon and approved, Wesco will continue to operate as it does presently as an 80.1%-owned subsidiary of Berkshire,” the company added.
Berkshire’s class A shares closed down 0.6% at $114,412 on Thursday. The class B stock rose 21 cents to $76.61.
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