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March 28, 2013

Berkshire to Pay Nothing to Be Among Top Goldman Sachs Holders

“Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) is poised to become one of Goldman Sachs Group Inc. (GS)’s largest shareholders without paying anything after the companies agreed on a plan to settle warrants granted at the height of the 2008 financial crisis.

Berkshire had the right to buy 43.5 million Goldman Sachs common shares for $115 apiece until Oct. 1. Under a deal announced by the companies today, Buffett’s firm will get Goldman Sachs stock equal to the difference between the average closing price during the 10 trading days before Oct. 1 and the exercise price, multiplied by 43.5 million.

The new deal reduces some of the risk for Berkshire, which would have had to spend about $5 billion to exercise the warrants and then sell the shares — about 9 percent of the bank’s outstanding stock — to cement a profit. For Goldman Sachs, the fifth-biggest U.S. bank by assets, the plan seals Berkshire’s participation as a shareholder in the company and reduces the dilution for other investors.”

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Read full Bloomberg article here

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