If Wesco shareholders approve the sale of roughly 1.4 million shares, which has been approved by the company's board, they will have a choice of accepting either cash or Class B shares of Berkshire stock in a deal that is expected to close by the end of the second quarter.
Wesco is a conglomerate that owns insurance businesses and an eclectic mix of operating companies, similar to Berkshire but Wesco is smaller and less diverse. The Pasadena, Calif., company has been an indirect subsidiary of Berkshire since 1983.
Officials at Berkshire's headquarters in Omaha did not immediately respond to a message Monday.
Wesco's Chairman, CEO and President Charlie Munger, who also serves as Berkshire's vice chairman, declined to comment on the deal Monday.
Berkshire announced plans to buy the remaining 19.9 percent of its subsidiary in September. Wesco says its board concluded that the deal was fair and in the best interests of its shareholders other than Berkshire.
Wesco has been controlled by Berkshire, which owns 5.7 million Wesco shares, for more than 30 years.
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.
The 87-year-old Munger leads 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.
Andy Kilpatrick, the stockbroker-author of "Of Permanent Value, the Story of Warren Buffett," said this Wesco deal makes sense because it will tie up a loose end for Berkshire and allow it to eliminate the expense of Wesco's separate reports and annual meeting.
"I think this is a happy end to a long investment," Kilpatrick said.
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.
Berkshire said Monday that if the deal closes before June, there will not be a 2011 Wesco shareholders meeting, but Munger will still hold a public event in Pasadena to give shareholders a chance to ask him questions. That event will be held May 4 if the deal closes before June, but if the approval takes longer, Munger will schedule his meeting several weeks after the merger is completed.
For the transaction to be completed, both companies said a majority of Wesco's non-Berkshire shareholders must vote to support it.
The deal values Wesco's shares at $386.55 apiece. That's up from last June's value of $352.66 per share before the deal was announced.
The estimated value of Wesco's stock will be adjusted before the deal closes based on Wesco's earnings and the value of its investments. Updates will be posted online at www.wescofinancial.com.
Wesco's stock gained $5.93 to sell for $386.60 in afternoon trading Monday. Berkshire's Class B shares gained 70 cents to sell for $83.87.
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