Warren Buffett cuts price by not paying commissions to Goldman Sachs, a partisan consultant for Alleghany
A bad blow is what Warren Buffett lashed at a major investment bank on Wall Street. News of the acquisition by Berkshire Hathaway, the conglomerate that heads the 90-year-old investor, of the Alleghany insurance company for 11.6 billion dollars went around the world yesterday. It is Buffett’s largest acquisition in years. The price per share indicated for the acquisition has passed a little in the background, not a round figure. The offer for Alleghany is in fact $ 848.02 per share, in cash.
Why not a round price? The explanation lies in the fact that Alleghany’s party consultant is the investment bank Goldman Sachs, but it did not receive its commission from Buffett. The Oracle of Omaha had put $ 850 per share on the table warning that it would not pay the bill for commissions to the banks involved in the operation. The offer was agreed at $ 848.02 per share, and was aimed only at Alleghany shareholders, Buffett argued, without commissions to investment banks. The result is written in a regulatory document: the agreed purchase price subtracts about $ 27 million for Goldman.
The 91-year-old has always shown contempt for investment bankers, called expensive “Money mixers” who “clamored to be fed” in his annual letter published in 2015. When he was a shareholder and director of Gillette, Buffett unsuccessfully pushed in 1996 to cut fees to Duracell International Inc bankers. The Oracle of Omaha Known for his witty aphorisms, he rarely uses an investment banker for his business, relying instead on his Berkshire vice president Charlie Munger of the former law firm, Munger, Tolles & Olson. There have been exceptions, however. Byron Trott, a former Goldman Sachs Group banker who helped Buffett reach a deal to buy McLane food distribution company from Walmart Inc. “He understands Berkshire much better than any other banker we’ve talked to and – it hurts me. say so – he earns his fee ”so Buffett in his letter published in 2004. But it was a more unique than rare case.