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Buffett to get increased share in Goldman Sachs | Buffett to get increased share in Goldman Sachs |
(2 days later) | |
Warren Buffett is to become a top 10 shareholder of Goldman Sachs after he agreed to amend the terms of his 2008 investment in the bank. | Warren Buffett is to become a top 10 shareholder of Goldman Sachs after he agreed to amend the terms of his 2008 investment in the bank. |
In September 2008, Mr Buffett's Berkshire Hathaway fund invested $5bn (£3.3bn) in Goldman at 10% interest. | In September 2008, Mr Buffett's Berkshire Hathaway fund invested $5bn (£3.3bn) in Goldman at 10% interest. |
In addition to the interest, Berkshire was given the opportunity to buy billions of additional shares in the future. | In addition to the interest, Berkshire was given the opportunity to buy billions of additional shares in the future. |
Goldman is now giving Buffett shares for free to limit diluting its stock. | Goldman is now giving Buffett shares for free to limit diluting its stock. |
In return, the deal means Berkshire does not have to spend billions of dollars up front. | In return, the deal means Berkshire does not have to spend billions of dollars up front. |
Under the 2008 deal, Berkshire had the right - called a warrant - to buy a further 43.5 million shares for $115 each on 1 October this year. | Under the 2008 deal, Berkshire had the right - called a warrant - to buy a further 43.5 million shares for $115 each on 1 October this year. |
The $115 figure compares with Goldman's $147.43 share price in early Tuesday trading. | The $115 figure compares with Goldman's $147.43 share price in early Tuesday trading. |
Instead of buying the shares, Berkshire will now get additional Goldman shares equivalent in value to the difference between $115 and the average closing price of Goldman's shares for the 10 trading days before 1 October. | |
According to estimates, this will make him the bank's ninth-largest shareholder. | According to estimates, this will make him the bank's ninth-largest shareholder. |
Goldman Sachs chief executive Lloyd Blankfein said: "We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs." | Goldman Sachs chief executive Lloyd Blankfein said: "We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs." |
Mr Buffett, one of America's most celebrated investors, last month bought the Heinz food products business for $28bn. | Mr Buffett, one of America's most celebrated investors, last month bought the Heinz food products business for $28bn. |
The 2008 investment in Goldman came at the height of the global financial crisis. | The 2008 investment in Goldman came at the height of the global financial crisis. |
It attracted much media attention, specifically surrounding the generous 10% interest the bank agreed to pay Berkshire. | It attracted much media attention, specifically surrounding the generous 10% interest the bank agreed to pay Berkshire. |
Analysts said this reflected Goldman's need for the funds, and the lack of other potential investors either willing or able to put the money forward. | Analysts said this reflected Goldman's need for the funds, and the lack of other potential investors either willing or able to put the money forward. |
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