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Berkshire Hathaway Inc. Message Board

  • HopeToBe_WBCopyCat HopeToBe_WBCopyCat Jul 7, 1998 11:44 PM Flag

    Conversion GRN to BRK.b

    I sold bunch of BRK.b today and I bought GRN. My
    GRN holding will get converted back into BRK.b
    someday. My calculation shows that I am better off by
    about 5.5 percent after taking the transactions costs
    into account. We know all about risks of the deal not
    going through. In addition, there are some tax issues
    if one can not somehow sell other shares where there
    is a loss. Any other problem?? Any comments.


    I really feel that if one already owns BRK, one
    should seriously think about selling some and buying
    GRN. If one is thinking of buying new BRK, one should
    instead buy GRN. At this point in time, there is very
    little benefit in buying BRK. Thus, more people will be
    selling BRK. I am not sure if it would result in a
    temporary price decline. But, it is likely. As some of us
    have noticed, the premium has gone down from about
    seven percent to about 5 percent in a few days.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • GRN/BRK merger is expected to be a tax-free
      merger (i.e. to the holders of GRN shares). Almost
      surely. I think it was announced
      it to be so.
      Technically, IRS will issue some kind of ruling if
      the
      companies want that.

      Of course, if someone already
      owns BRK (like I do), it is more
      complicated.

    • Hi Linda, Although personally, I have not seen or experienced a tax problem with Stock swaps. Berkshire, the company might get taxed, but its shareholders should not...

    • DearBobo,

      I called the investor relations
      dept thanks to your phone number and spoke to a very
      conversant, spontaneous and warm individual.
      She said the
      deal is slated to go through somewhere between Oct 1st
      and Dec 31st. I asked if it didn't go through then,
      for some reason, would it mean the deal was off. She
      said that, in her opinion, if the deal didn't go
      through then, it would most likely go through sometime
      after.

      I asked what the mood around GenRE was
      concerning the merger. She said it was optomistic, that
      people were looking forward to it.

      I asked about
      the tax consequences. She said it was a stock for
      stock exchange and there weren't any.

      Well,
      that's about it... I'll be going for a swim
      soon...

      Good luck in everything and thanks for your
      replies

      L.

    • I did not ask that question when I spoke to the
      shareholder relations guy. I did try 3 times during the
      course of the conversation to pin him down on when this
      deal would be done. He absolutely refused to speculate
      beyond the standard boilerplate of "sometime in the 4th
      quarter pending govt. approval" He was pleasant enough
      but it was plain that he had been coached. The main
      switchboard is 203 - 328-5000. A $5.00 longdistance phone
      call is plenty cheap compared to the investment you
      are contemplating........especially if it gives you
      peace of mind. Good Luck

    • Thanks for the "further" info on GRN/BRK.


      I'm getting myself geared up to buy GRN, but just one
      more question: is there a tax consequence to the
      conversion of GRN to BRK?

      Thanks very much. You and
      all the other posters have been generous in your
      help. It is deeply appreciated.

      L.

    • To add further to you reply to
      Lindaseed...........I called up to GenRe headquarters and had a talk to
      their share holder relations guy. The merger is to be
      completed "sometime in the 4th quarter pending govt.
      approval" Each share holder will be sent a complete proxy
      statement "in excruciating detail" and also in plain
      English describing your conversion options to BRK. If you
      want "A" stock your fractional shares will be paid off
      in"B"and any leftover fraction of "B" will be paid to your
      account at your brokers in cash. Based on present values,
      I guess some folks could get $2500 to $2600 in
      cash. The beat goes on.........

    • business week and to a certain extent barron's
      say that brk bought grn to lessen risk of a market
      downturn and to use overpriced brk stock as an inflated
      currency. the economist, a magazine in the austin library
      sort of like a european newsweek says:
      1. on a $600
      million supercat policy brk has a 94% chance of making
      $400 million.
      2. catastrophy "bonds", which web
      scoffs at in the annual report, are not that bad a
      thing.
      3. without a major catastrpohy there will always be
      a lot of capital flowing into catastrophy insurance
      so prices will stay low.
      the interesting thing
      about this article is that it has a contrarian point of
      view oposite of what the media here says. buying grn
      might not have been a way to get partly out of the
      market and into cash.

    • I have decided that I should buy another 9 shares
      of GRN to insure that I get a BRK A (as opposed to
      B's), just in case the "Tax Free" status is not granted
      when the merger closes. I wonder what a good guess is
      as to when the merger will actually be finialized?

    • I've been thinking about your comments. Correct
      me if I am wrong:

      BRK.B shares =
      GRN(.105)

      If one bought 100 GRN today, one would get about 10
      BRK.B shares.

      At today's price for GRN (258)
      and BRK.B (about 2589) wouldn't one end up with about
      the same cost for each?

      Thank you for your
      input.

      L.

      • 2 Replies to lindaseed
      • Be careful, do not ignore the third decimal point
        as some calculators round it off. If you ignore
        that, you will not get the positive five
        percent.

        Explanation:


        If you buy 1 GRN today, you pay
        $259.

        You get 0.105 of BRK which implicitly means you get
        0.105 x 2599 = $ 271.95.

        So, you save =
        271.95-259 = $12.95 on an investement of $259, or aobut five
        percent.

        If you prefer, you may try buying 1000
        shares of GRN (a bit too much for most people but the
        math is easier).

        For 1,000 shares of GRN, you
        pay $259,000

        You get 105 shares of BRK.b =
        105 x 2599 = $272,895 which means that you save
        $13,895. (This is what I have done, and the discount was a
        little more a couple of days ago.)

        Take care.

 
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