Warren Buffett to spend $3 billion on GE shares

Irish Sun

Wednesday 1st October, 2008  

General Electric announced Wednesday that it has reached agreement to sell $3 billion of perpetual preferred stock in a private offering to Berkshire Hathaway, Inc.

The perpetual preferred stock has a dividend of 10% and is callable after three years at a 10% premium. In conjunction with ...

...offering, Berkshire Hathaway will also receive warrants to purchase $3 billion of common stock with a strike price of $22.25 per share, which is exercisable at any time for a five-year term. The price is about 10% below the average trading price Wednesday.

Berkshire Hathaway Chairman and CEO Warren Buffett said, “GE is the symbol of American business to the world. I have been a friend and admirer of GE and its leaders for decades. They have strong global brands and businesses with which I am quite familiar. I am confident that GE will continue to be successful in the years to come.

GE CEO Jeff Immelt said, “This action does two things for GE investors. First, it enhances our flexibility and allows us to execute on our liquidity plan even faster. Second, it gives us the opportunity to play offense in this market should conditions allow. In addition, we remain committed to the Triple A rating and in the recent market volatility, we continue to successfully meet our commercial paper needs.

“The economic environment remains volatile,” Immelt said. “However, the company’s performance remains on track with the earnings guidance we provided last week for 2008, including third quarter financial services earnings of approximately $2 billion and industrial earnings growth of between 10 and 15 percent, excluding our Consumer & Industrial business.

GE also announced Wednesday plans to offer at least $12 billion of common stock to the public. The underwriters will have a 30-day option to purchase shares representing an additional 15% of the offering amount from GE to cover over allotments, if any. The offering is expected to be priced prior to Thurdays’s market open in the U.

Goldman, Sachs & Co. is the bookrunner for the capital-raisings. GE expects that Banc of America Securities, LLC, Citi, Deutsche Bank Securities, J.

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