GE to raise $15 billion, Buffett gets preferred stake

Wed Oct 1, 2008 4:41pm EDT
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By Scott Malone

BOSTON (Reuters) - General Electric Co plans to raise $15 billion through stock sales -- including $3 billion from Warren Buffett -- to improve liquidity and give it the option of more acquisitions at a time of intense market turmoil, the U.S. conglomerate said on Wednesday.

The news helped to erase some of the day's slide in GE shares, which fell more than 9 percent earlier, but was not enough to push them into positive territory. Investors remained worried about the troubles at GE's vast finance arm -- which has businesses ranging from loans to mid-sized business to investing in real estate.

It was the second big strategic investment by Buffett's Berkshire Hathaway Inc in the battered finance sector in as many weeks. Last week Berkshire said it would invest $5 billion in Wall Street's Goldman Sachs Group Inc.

"GE is the symbol of American business to the world," Buffett, one of America's most famous investors, said in a statement. "I am confident that GE will continue to be successful in the years to come."


The move was a sign that GE is looking to shore up its finances as the U.S. faces what could be its worst financial storm since the Great Depression, investors said. The U.S. Senate was expected to vote later on Wednesday on a $700 billion bailout package for Wall Street.

"It's an insurance policy in case things get worse," said Wayne Titche, co-manager of the AHA Diversified Equity Fund, part of AMBS Investments, which counts GE among its holdings. "It just shows how jittery the market is that a firm triple-A rated (company) like General Electric feels that they need to raise that extra cushion. But in today's market, better safe than sorry."

GE shares have lost about 34 percent of their value this year, a steeper slide than the Dow Jones industrial average or the broad Standard & Poor's 500 index.   Continued...

<p>Investor Warren Buffett listens to a question during a news conference in Madrid May 21, 2008. REUTERS/Andrea Comas</p>