GE to raise $15b on stock sale, Buffett buy
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General Electric Co., bolstering its cash cushion in volatile markets, said it will raise $3 billion from Warren Buffett's Berkshire Hathaway Inc. and at least $12 billion by selling common stock.
Berkshire will buy preferred shares that will pay an annual 10 percent dividend and are callable after three years at a 10 percent premium, Fairfield, Conn.-based GE said yesterday in a statement. Berkshire, run by the 78-year-old billionaire investor Buffett, also gets warrants to buy $3 billion of common stock with a strike price of $22.25 a share for five years.
The moves accelerate the plan chief executive Jeffrey Immelt disclosed last week to improve finances at GE, which has lost more than 40 percent of its market value in the last year.
The vote of confidence from Buffett, who struck a similar deal with Goldman Sachs Group Inc. last month, may further burnish the company, which has maintained top-level AAA credit ratings through the global crisis.
GE's shares fell $1 to $24.50 in New York Stock Exchange composite trading, recovering some of the 15 percent decline earlier in the day.
Buffett, in the statement, called GE the "symbol of American business to the world." Berkshire spokeswoman Jackie Wilson didn't return a message seeking comment.
"I followed the company for a very long time," Buffett said in an interview on GE's CNBC television network. "These markets are offering us opportunities that weren't available six months or a year ago."
GE has said more than once in the past month that it didn't need to raise outside capital.
On Sept. 25, Immelt reduced his annual profit forecast for the second time this year and suspended a $15 billion buyback program, shifting capital to protect GE's dividend and AAA credit rating, the highest available, as volatility in credit markets reduced profit at its finance arm.
Unlike many banks and investment firms, GE still expects to make a profit at its finance arm this year. The finance profit may exceed $9 billion, including $2 billion in the third quarter, the company said Sept. 25.
