Buffett to take major Goldman Sachs stake in warrant deal

Tue Mar 26, 2013 11:11am EDT
 
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By Ben Berkowitz and Lauren Tara LaCapra

(Reuters) - Warren Buffett will become one of Goldman Sachs' (GS.N: Quote) ten largest shareholders essentially for free, after he and the bank amended a 2008 deal to exchange his potential profit on Goldman warrants for stock.

The exchange, which Goldman detailed on Tuesday, saves Buffett billions of dollars in upfront costs and lets Goldman minimize dilution to its stock. Under a 2008 deal, Buffett had held the right to acquire about 43.5 million shares of stock at an exercise price of $115.

Goldman said it will now give Berkshire shares reflecting the difference between the warrants' original exercise price of $115 and the average closing price of Goldman's stock for the 10 trading days up to October 1.

Goldman shares rose 0.9 percent to $147.43 in early trading.

At that price, the structure of the deal implies that Berkshire would receive 9.6 million Goldman shares. That would make Buffett the ninth-largest investor in the firm, according to Thomson Reuters data.

"We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs," Goldman Sachs Chief Executive Lloyd Blankfein said in a statement.

Buffett, in the same statement, affirmed that Berkshire intended to retain a "significant investment" in Goldman.

The new shares represent about 2 percent of Goldman's outstanding stock as of mid-February. Had Buffett fully exercised the warrants, it would have represented about 9 percent of Goldman's stock.   Continued...

 
Traders work on the floor of the New York Stock Exchange near the Goldman Sachs stall July 16, 2010. REUTERS/Brendan McDermid