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; firstname.lastname@example.org