Buffett to increase stake in Goldman

AFP-JIJI

Warren Buffett’s Berkshire Hathaway will become one of Goldman Sachs’ largest stockholders in the latest reward for its aid to the bank at the height of the 2008 financial crisis.

Berkshire could receive more than 9 million Goldman shares under an amended warrants deal announced Tuesday by the storied investment bank.

Under the original deal, Berkshire invested $5 billion in preferred Goldman shares that carried a dividend of 10 percent. Goldman also granted Berkshire warrants to purchase $5 billion of common stock at $115 per share.

In March 2011, Goldman bought back the preferred shares for $5.5 billion, giving Berkshire a return of $500 million on top of the dividends received, but leaving it with the warrants, which expire Oct. 1. The warrants would have granted Berkshire 43.5 million Goldman shares, but cost it $5 billion in cash — though, with Goldman shares trading over $145, Berkshire could have registered an immediate large paper gain.

In the amended agreement, Goldman will issue to Berkshire a number of shares based on the profit Berkshire could have reaped from the difference of the exercise price and the average market value of the shares over the 10 days to the exercise date.