Warren Buffett’s Berkshire Hathaway Inc. offered $1.7 billion in cash to buy Bermuda-based reinsurer IPC Holdings Ltd. earlier this month, said two people with knowledge of the bid.
Berkshire is the “Party M” named in a regulatory filing today as making a July 1 bid, according to the people, who asked not to be identified because the offer wasn’t public. The bid was rejected in favor of a lower stock-and-cash offer from Validus Holdings Ltd. because Party M demanded IPC not pay a third-quarter dividend, the filing said. Party M is called “a global insurance and reinsurance company” in the document.
Buffett built Omaha, Nebraska-based Berkshire into a $140 billion company by investing premiums from insurance and reinsurance operations while waiting for claims to emerge. Berkshire’s largest acquisition was the $16 billion purchase of reinsurer General Re in 1998, and Buffett’s firm has invested more than $2 billion in Swiss Reinsurance Co. in the past year as the Zurich-based firm was hobbled by writedowns.
“A deal with IPC could have been a cost-effective way for Berkshire to spread its wings even more” in reinsurance, said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “The environment for deals is getting better every day” amid the recession, he said. IPC’s book value, a measure of assets minus liabilities, was about $1.85 billion as of March 31.