Warren Buffett has dipped into Berkshire Hathaway’s $150bn cash pile with a $12bn deal for Alleghany, an insurance-to-toy manufacturing conglomerate.

Omaha-based Berkshire, which itself consists of a series of large insurers with other companies from Duracell to Kraft Heinz, said on Monday that it would pay $848 per share for Alleghany.

Alleghany was founded almost 100 years ago as a railway company and at one point owned nearly a fifth of US miles of track. These days, it owns a range of insurance and reinsurance companies as well as a toy producer, a funeral products maker, a hotel developer and a manufacturer of custom trailers. It produced profits of $1bn last year.

Buffett said that “Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years”, adding that the group “has many similarities to Berkshire Hathaway”.

The price is a 29 per cent premium to Alleghany’s share price over the past 30 days and is a multiple of 1.26 times the company’s book value.

Alleghany’s chair Jefferson Kirby said the deal was “a rare opportunity to join forces with a like-minded and highly respected investor and business leader”.

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