Jonathan Stempel and Noor Zainab Hussain

NEW YORK (Reuters) – Warren Buffett’s Berkshire Hathaway Inc bought insurance company Alleghany Corp Monday for $11.6 Billion. It was only weeks after Buffett, a 91 year-old billionaire had lamented a lackluster investment opportunity.

Alleghany is the owner and operator of Transatlantic Holdings Reinsurer. He would increase Berkshire’s extensive portfolio of insurers that includes Geico auto insurance, General Re reinsurer and an unit that protects against extreme risks and major catastrophes.

Buffett said that Berkshire would be the ideal permanent home for Alleghany. He has been running Berkshire since 1965.

It was one of the five largest Berkshire acquisitions in Berkshire’s past. Buffett would be reunited with Joseph Brandon. Brandon led General Re between 2001 and 2008, and became Alleghany’s chief executive officer in December.

The deal would bring an end to Buffett’s drought for large acquisitions over six years and allow him to spend some of his $146.7 billion cash equivalents at the end.

Buffett wrote in February 26, his annual shareholder letter complaining that “internal opportunity deliver far greater returns than acquisitions”, and that there is little that excites us about equity markets. Buffett promised to have $30 billion cash in his pocket.

Cathy Seifert is an analyst with CFRA Research, New York. She said that the merger shouldn’t be surprising, because Buffett knows Alleghany, Brandon.

She said that Berkshire was under immense pressure and has agreed to a deal. However, Alleghany is a good addition.”

This is an excellent fit in terms of the company’s business model and its culture.

Berkshire paid $848.02 per Alleghany share in cash, a 25 percent premium to Friday’s closing prices. Berkshire’s Omaha-based subsidiary Alleghany will operate Alleghany as an autonomous unit.

Morning trade saw Alleghany rise 24.7%, to $844.15

‘MINI-BERKSHIRE’

The transaction will close within the fourth quarter, subject to shareholder and regulatory approvals.

Alleghany offers a 25 day “go-shop” period for finding a better deal. Berkshire is well-known for refusing to enter into bidding wars on whole companies.

Berkshire has a larger portfolio that includes the BNSF Railroad, Berkshire Hathaway Energy as well as Dairy Queen icecream. Insurance is a common source of more than 20% of the operating profit.

Berkshire has also invested hundreds of billions of dollar in stocks, such as Apple Inc. (NASDAQ:), and more than $6.4 Billion in Occidental Petroleum Corp.

New York’s Alleghany, founded by Oris and Mantis van Sweringen railroad entrepreneurs in 1929. It was later transformed under Fred Morgan Kirby II (NYSE:) II into an investment and insurance operating company.

Seifert from CFRA Research stated that Alleghany was a mini-Berkshire, an insurer conglomerate that redeploys some capital to other businesses.

Buffett said the companies shared “many similarities” but Brandon stated that Berkshire was “epitomizing our long-term managerial philosophy.”

Alleghany has other units, including RSUI Group (wholesale specialty insurance underwriter) and CapSpecialty which offers specialist protection for small and mid-sized businesses.

Alleghany Capital Corp, which it owns, has several businesses other than insurance, including those that deal with industrial parts and machine tools as well as hotels, toys, funeral services, and companies that provide hotel, toy, and medical supplies.

Goldman Sachs (NYSE:) and the law firm Willkie Farr & Gallagher advised Alleghany on the transaction. The law firm Munger, Tolles & Olson advised Berkshire.