Wesco Financial Corporation Buyout Subject to Shareholder Investigation

After Berkshire Hathaway announced its intent to takeover the remaining stake of Wesco Financial an investigation on behalf of investors of Wesco Financial Corporation (, AMEX:WSC) concerning possible breaches of fiduciary duty was announced.

Wesco Financial Corporation, located in Pasadena, CA is engaged in three principal businesses, the insurance business, the furniture rental business, and the steel service center business, through its direct or indirect wholly owned subsidiaries. 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.

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.

The investigation by a law firm “concerns whether Berkshire Hathaway as controlling shareholder of Wesco Financial, as well as the directors of Wesco Financial will breach their fiduciary duties by not acting in Wesco Financial Corporation (AMEX:WSC) monitory shareholders' best interests in connection with a potential takeover process of Wesco Financial, whether the Wesco Financial Corp Board of Directors will breach their fiduciary duty to Wesco Financial (WSC) stockholders by failing to adequately shop the Company prior to entering into any agreement, whether the Board of Directors will breach their fiduciary duties by not seeking a deal that will provide better value for Wesco Financial Corporation, and whether Berkshire Hathaway ultimately will underpay for Wesco Financial Corporation (WSC), thus unlawfully harming WSC stockholders.”