OMAHA, Neb. — Warren Buffett's company said Thursday it will offer to buy the roughly 1.4 million shares it doesn't already own of its subsidiary Wesco Financial Corp., and the news sent Wesco's stock soaring 11 percent.
Berkshire Hathaway Inc. says it will offer a combination of cash and Class B Berkshire stock to acquire the remaining 19.9 percent of the Pasadena, Calif., company led by Buffett's partner and Berkshire's vice chairman, Charlie Munger.
Wesco is a conglomerate that owns insurance businesses and an eclectic mix of operating companies, much like Berkshire Hathaway, but Wesco is smaller and less diverse.
Berkshire said in a filing with the Securities and Exchange Commission it will discuss the deal with Wesco's independent directors. Terms were not disclosed.
Berkshire officials in Omaha, where the 79-year-old Buffett is based, did not immediately respond to a message. And Munger did not immediately respond to a message left at his Pasadena office.
Wesco stock gained $35.25 to sell for $360 Thursday after the news. Berkshire's B shares declined 37 cents to $76.43.
In his annual letter to Wesco shareholders, Munger estimated that at the end of last year Wesco was worth $358 per share, up from roughly $334 per share at the end of 2008.
Wesco has been controlled by Berkshire, which owns 5.7 million Wesco shares, for more than 30 years. Berkshire board member and Microsoft co-founder Bill Gates owns 89,972 shares of Wesco stock, or about 1.3 percent of the company.
Munger has often described the unusual structure of Wesco as a historical accident. Munger and Buffett took control of Wesco in 1973 through one of their other investments, the Blue Chip Stamp Co., which later became part of Berkshire.
Andy Kilpatrick, the stockbroker-author of "Of Permanent Value, the Story of Warren Buffett," said it seems like a good time for Berkshire to do this because Wesco has been trading at a relatively affordable level and Berkshire has the cash needed to complete the deal. Kilpatrick says Munger has often said Wesco would become part of Berkshire one day.
"It ties up a loose end that's always been there at Berkshire," Kilpatrick said.
The 86-year-old Munger serves as chairman, CEO and president of Wesco, but it has always been run as part of Berkshire. Munger consults with Buffett on Wesco investment decisions and major capital allocations, much like Buffett, as Berkshire's chairman and CEO, consults with Munger about Berkshire decisions.
Wesco has a reinsurance division and it owns Kansas Bankers Surety Co., which offers specialized insurance to banks; CORT Business Services, which rents furniture to companies; and Precision Steel, which buys scrap metal, cuts it to order and resells it. Wesco itself had 13 employees at the end of 2009.
Wesco, as a publicly traded company, has to hold its own annual meetings, and in recent years that meeting has attracted roughly 1,000 people who want a chance to hear Munger's thoughts because he runs the Wesco meeting in Pasadena, without Buffett.
A few days earlier each spring, Munger answers questions alongside Buffett for hours at the Berkshire shareholders meeting in Omaha.
If the Wesco deal goes through, it may become harder for investors to find a chance to hear Munger alone.
Wesco is one of Berkshire's more than 80 subsidiaries. Berkshire owns clothing, insurance, furniture, utility, jewelry and corporate jet companies. Berkshire also has big investments in companies including Coca-Cola Co. and Wells Fargo & Co.
Berkshire Hathaway Inc.: www.berkshirehathaway.com
Wesco Financial: www.wescofinancial.com