Wesco Financial Corporation Investor Files Lawsuit Against Buyout

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Company Name(s): 
Wesco Financial Corporation
Case Name: 
Wesco Financial Corporation Deal Case 09/01/2010
Case Status: 
Lawsuit Filed
Affected Securities
AMEX: WSC
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
09/01/2010
Summary: 

An investor of Wesco Financial Corporation (, AMEX:WSC) filed a lawsuit in State Court against members of the board of directors of Wesco Finanical alleging breaches of fiduciary duty arising out of the attempt to sell Wesco Financial too cheaply to Warren Buffet's Berkshire Hathaway.

According to the complaint the plaintiff alleges that the defendants breached their fiduciary duty in connection with the attempt to sell the remaining 20 percent Wesco Financial to Berkshire Hathaway at an unfair price through an unfair process. On August 25, 2010, Berkshire Hathaway’s management determined to propose to Wesco a cash-stock election transaction in which it would acquire the remaining 19.9% of the shares of Wesco that it does not presently own in exchange for Berkshire Hathaway Class B shares and/or cash valued at the book value per share of Wesco as of a time reasonably contemporaneous with the closing of such a transaction.

The transaction would be valued at about USD 460 million, based on Wesco's closing stock price of USD 324.75 on Wednesday. Shares of Wesco Financial Corporation (Public, AMEX:WSC) traded on August 26, 2010 at roughly $325 per share and jumped in response to the offer to over $380 per share, or an increase of 17%.

But shares of Wesco Financial Corporation (AMEX:WSC) traded over $400 per share as early as March 2010, and traded during April at over $390 per share and in May 2010 as high as $386 per share. During 2008 WSC shares reached $440 per share, and almost $500 during 2007.
And while Wesco Financials revenue increased over the past four years by 34% its Net Income decreased by 41%. Wesco Financial Corporation reported in 2006 $605.73million Total Revenue, in 2007 $630.92million, in 2008 $798.95million, and in 2009 $813.33million. Its Net income went from $92.03million in 2006 to $54.07million in 2009. Warren Buffett's Berkshire Hathaway Inc. holds with 5.7million shares roughly 80% of Wesco Financial Corporation shares thorugh Blue Chip Stamps, which is a wholly owned subsidiary of OBH LLC, which is a wholly owned subsidiary of Berkshire Hathaway Inc. Wesco Financial Corp is run by Berkshire Vice Chairman Charlie Munger.