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article imageBuffett to Invest $3 Billion in G.E.

By Owen Weldon     Oct 1, 2008 in Business
It looks like Warren E. Buffett is at it again and this time he is buying into the bluest of blue-chip companies at a very steep discount.
Warren E. buffet, the famed investor, is buying $3 billion in perpetual stock from General Electric, the conglomerate seeking to allay concerns about its financial health amid the whipsawing markets.
G.E., in trouble because of its massive financial operations, said that it will also sell at least $12 billion of common stock.
This is the latest investment by Buffett amid the financial clampdown. The famous investor bought $5 billion in perpetual preferred stock in Goldman Sachs just last week. Goldman Sachs is a financial giant that has recently transformed itself into a bank holding company.
Shares in G.E. have fallen 42 per cent this year amid concern that the company is too big to maneuver itself amid the market turmoil. The company has been long considered a bellwether because of its broad range of businesses. G.E. has already cut its earnings estimates twice and it has said that it will shed businesses to focus om core operations like infrastructure.
G.E.'s concessions, like Goldman, to Buffett are steep. After three years the perpetual stock can be repurchased at a 10 percent premium and the perpetual preferred stock carries a dividend of 10 percent. Berkshire Hathaway will also receive warrants to buy $3 billion of common stock at $22.25 within the next five years.
Buffett released a statement saying that G.E. is the symbol of American business to the world and he said that he has been a friend and admirer of G.E. and its leaders for decades. Buffett went on and said that he is very familiar with the company's global brands and businesses and that he is confident that GE will continue to be successful in the years to come.
Jeffrey Immelt is G.E.'s chief executive and he said that the investment will bolster the massive conglomerate's financial base and help it keep its sterling triple-A credit rating. Immelt also said that he is confident in G.E.'s strategic plan, even though he expects the markets to remain volatile for quite some time.
Goldman worked as the bookrunner for the deal and G.E. said that it expects to add expects to add Bank of America, Citigroup, Deutsche Bank, J.P. Morgan and Morgan Stanley as additional bookrunners.
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