March 26, 2013

Warren Buffett to Become Major Goldman Shareholder

Amended warrant deal to be exercised in October

Warren Buffett (Photo: AP) Warren Buffett (Photo: AP)

What? Wirehouses are in trouble? Not according to the Oracle.

Warren Buffett will become one of Goldman Sachs' (GS) 10 largest shareholders after the bank amended a warrant agreement made with the billionaire from 1998.

The deal saves Buffett’s Berkshire Hathaway (BRK) billions in costs and lets Goldman maintain the accretion to its stock price.

Under the original agreement, the warrant provided Berkshire Hathaway the right to purchase 43,478,260 shares of Goldman Sachs' common stock, par value $0.01 per share, at an exercise price of $115 at any time until Oct. 1.

Under the amended agreement, Goldman will deliver to Berkshire the number of shares of common stock equal in value to the difference between the average closing price over the 10 trading days preceding Oct. 1 and the exercise price of $115 multiplied by the number of shares of common stock covered by the warrant (43,478,260).

At that price, the structure of the deal implies that Berkshire would receive 9.6 million Goldman shares. That would make Buffett the ninth-largest investor in the firm, according to Thomson Reuters data.

Claiming that his first transaction was actually with Goldman Sachs more than 50 years ago, Buffett said in a statement Tuesday that "we intend to hold a significant investment in Goldman Sachs. I have been privileged to have known and admired Goldman's executive leadership team since my first meeting with Sidney Weinberg in 1940."

"We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs," Lloyd Blankfein, the wirehouse’s chairman and CEO, added.

Reprints Discuss this story
This is where the comments go.