Berkshire Hathaway will buy up to $6 billion of General Electric’s common and preferred stock. At the same time, GE is offering up $12 billion of its common shares.
The news comes just a week after renowned investor Warren Buffett — who heads Berkshire — put nearly the same amount into another giant institution, Goldman Sachs. Under this latest deal, Berkshire Hathaway will get $3 billion of perpetual preferred stock and warrants to buy $3 billion of common stock with a strike price of $22.25 per share.
GE CEO Jeffrey Immelt said on Wednesday that this new capital will help the company in two ways during this “volatile” economic environment. “First, it enhances our flexibility and allows us to execute on our liquidity plan even faster,” he said. “Second, it gives us the opportunity to play offense in this market should conditions allow.”
Furthermore, the company has been able to maintain its Triple A rating and its access to short-term capital through commercial paper, he added.
Along with his large investment, Buffett also expressed his confidence in the GE brand in a news release. “GE is the symbol of American business to the world,” he said. “I have been a friend and admirer of GE and its leaders for decades.”