NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway Inc <BRKa.N> <BRKb.N> will sell its 16.3 percent stake in White Mountains Insurance Group Ltd <WTM.N> in a transaction valued at $836 million, seven years after investing in the Bermuda-based insurer, White Mountains said on Monday.
By Jonathan Stempel
NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway Inc <BRKa.N> <BRKb.N> will sell its 16.3 percent stake in White Mountains Insurance Group Ltd <WTM.N> in a transaction valued at $836 million, seven years after investing in the Bermuda-based insurer, White Mountains said on Monday.
Berkshire will exchange its 1.724 million shares for about $751 million of cash plus two businesses, Commercial Casualty Insurance Co and International American Group Inc, that have $435 million of assets and $58 million of adjusted shareholder equity, White Mountains said.
Ray Barrette, White Mountains' chief executive, said the agreement lets the Hamilton-based company exit businesses with potentially volatile reserves, use capital more efficiently and redeem stock at a small premium to book value.
!ADVERTISEMENT!The $751 million of cash is more than double the $369 million that Berkshire has said it invested in White Mountains. It would bolster Berkshire's cash stake, which ended 2007 at $44.33 billion. Buffett has said he would like to make a large acquisition.
Jackie Wilson, Buffett's assistant, said Berkshire had no immediate comment.
Berkshire, an insurance and investment company, initially agreed to invest $300 million in White Mountains in 2001, when the latter paid about $2.2 billion for the U.S. property and casualty operations of Britain's CGNU Group.
Buffett had been a long-time friend of Jack Byrne, who was White Mountains' chief executive at the time. Byrne is credited with improving the fortunes of auto insurer Geico Corp in the 1970s, with Buffett as an investor. Berkshire now owns Geico.
Barrette said "all shareholders benefited handsomely from the relationship" with Omaha, Nebraska-based Berkshire. "White Mountains is now a larger, more diversified business, competing actively in many areas with Berkshire Hathaway. This is a graceful, value-enhancing way to go our separate ways."
White Mountains said it would have about 8.8 million shares after the transaction, which it values at $485 per share.
The company's largest investor is money manager Franklin Resources Inc <BEN.N>, which has a roughly 19.2 percent stake, according to Thomson ShareWatch.
White Mountains said neither it nor Berkshire will realize a taxable gain from the transaction, which requires regulatory approvals and a ruling from the U.S. Internal Revenue Service.
Shares of White Mountains fell $19, or 3.9 percent, to $459 in noon trading. Berkshire's Class A shares fell $405 to
$133,400.
(Editing by Dave Zimmerman and Gunna Dickson)
