CGNU Finds Buyer for U.S. Unit.

With strong backing from billionaire Warren Buffett, White Mountains Insurance Group Ltd. has agreed to buy CGU Corp. from CGNU plc for $2.06 billion in a sale that will saddle the London-based seller with a hefty loss.

White Mountains will also satisfy $1.1 billion of debt CGU owes to its parent in the form of $470 million in cash and $630 million of CGU business to be retained by CGNU. But the British insurance giant said it still would face an after-tax loss of [pound]1.38 billion (about $2 billion) on the sale.

Through Berkshire Hathaway Inc., Buffett has agreed to invest as much as $300 million in convertible stock of White Mountains, equivalent to about a 30% ownership stake. Meanwhile, Lehman Bros. is providing $1 billion of debt financing, and a small group of private investors is investing $300 million in a newly formed acquisition company in exchange for about 18% of its common stock. CGNU will be entitled to a $210 million payment in cash or stock six months after closing, with any stock not to exceed a 9.9% stake. White Mountains will place most of its business with the acquisition company.