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Buffett offers buyout to minority holders of partner Munger's Wesco Financial

August 26, 2010 | 12:32 pm

Warren Buffett’s Berkshire Hathaway Inc. on Thursday said it would offer to buy out the minority shareholders of Pasadena-based Wesco Financial Corp., which already is 80.1% owned by Berkshire.

Wesco is headed by Buffett’s longtime business partner Charlie Munger.

Berkshire said in a filing with the Securities and Exchange Commission that it would offer Berkshire shares and/or cash for the 19.9% of Wesco shares outstanding. Berkshire proposed to pay Wesco’s book value per share, which was about $353 as of June 30. The total offer would be worth about $500 million.

Shares of Wesco -- which operates insurance, furniture-rental and steel service-center businesses -- surged $34.03, or 10.5%, to $358.78. Berkshire’s Class B shares were off 55 cents, or 0.7%, to $76.25.

Why would Berkshire bother buying out the rest of Wesco? Erik Holm at Dow Jones News Service suggests the move is part of Buffett's planning for succession:

The deal, if approved, would be another step toward preparing Berkshire for a new generation of leaders. Wesco is run by Berkshire Vice Chairman Charlie Munger, Buffett's 86-year-old second-in-command, who has been less involved in Berkshire's day-to-day operations in recent years.

While Munger hasn't announced plans to step aside, other senior people in the organization have. Mostly recently, 73-year-old Lou Simpson, who ran the investment operation at Berkshire-owned insurer Geico Corp., last week announced plans to retire.

Buffett, who serves as Berkshire's chairman, chief executive and head of investing, turns 80 next week.

Wesco shares rose an average of 5.1% a year in the 10 years ended June 30, trailing Berkshire’s 8.5% average annual gain in the period. By contrast, the Standard & Poor’s 500 index lost an average of 1.6% a year in the period.

-- Tom Petruno