Dow Chemical to convert $4 billion of preferred shares into equity

Thu Dec 15, 2016 5:28pm EST
 
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(Reuters) - Dow Chemical Co (DOW.N: Quote) said it would convert $4 billion of preferred shares, held by Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote) (BRKb.N: Quote) and Kuwait's sovereign wealth fund, into common equity.

Buffett bought 3 million preferred shares of Dow for $3 billion in April 2009, helping Dow finance its acquisition of chemical company Rohm & Haas, while Kuwait Investment Authority bought 1 million preferred shares of Dow for $1 billion.

The conversion of these shares, which had an annual dividend of 8.5 percent, into common equity was contingent on Dow's shares trading above $53.72 per share for any 20 trading days in a 30-day window.

Up to Thursday's close of $58.35, Dow's shares had risen nearly 10 percent in the past month.

The conversion of each preferred share into 24.201 shares of Dow common stock, will give Buffett about 6 percent of the company and Kuwait Investment Authority about 2 percent.

Dow has paid Buffett $255 million in dividends every year, helping him make about $1.8 billion since 2009. Kuwait Investment Authority netted nearly $600 million in the same period.

Dow will now have to pay $133.6 million as annual dividend on the new common shares held by Buffett.

The loss of dividend from the preferred shares wont be too much of a hit for Berkshire, which ended September with $84.8 billion of cash.

Dow will be issuing 96.8 million new common shares, representing nearly 9 percent of its outstanding shares, as a result of the preferred share conversion.   Continued...

 
The Dow logo is seen at the entrance to Dow Chemical headquarters in Midland, Michigan May 14, 2015.    REUTERS/Rebecca Cook/File Photo