As billionaire Warren Buffett turns 87 today, his investment firm Berkshire Hathaway Inc has become the single-largest shareholder in Bank of America — the second-biggest bank in the US — by exercising its right to acquire 700 million shares at a steep discount. This has more than tripled the investment the firm made in the bank six years ago.
Warren Buffett’s Berkshire Hathaway is now the largest shareholder in the second- and the third-largest US banks, with stakes of roughly 6.6% in Bank of America and 10% in Wells Fargo & Co, according to Reuters. Other banks in which Berkshire Hathaway has a stake include JPMorgan Chase & Co, the largest US bank, where Todd Combs, one of Buffett’s deputy portfolio managers, is a director.
Bank of America on Tuesday said Berkshire Hathaway exercised warrants to acquire its shares for roughly $7.14 each, at about 70% discount to their closing price of $23.58 on Monday. The announcement was made after US markets closed. Bank of America’s new common shares are worth roughly $16.5 billion, giving Berkshire a roughly $11.5 billion paper profit. Warren Buffett has run the Omaha-based conglomerate since 1965.
Bank of America Chief Executive Brian Moynihan said, “In 2011, we welcomed Berkshire Hathaway as a shareholder, and we appreciate their continued support now as our largest common shareholder.” Berkshire will collect $336 million of annual dividends from Bank of America, more than the $300 million generated by the preferred stock, Reuters reported, adding that the firm also receives close to $800 million of annual dividends from Wells Fargo.
Earlier this month, Berkshire Hathaway cashed out its entire stake in the 125-year-old American multinational conglomerate General Electric worth $315 million in the second quarter, according to filings. Berkshire Hathaway owned about 10.6 million shares in the company. Following the exit of General Electric’s long-time CEO Jeffrey Immelt, Warren Buffett dumped all the holdings remained after he extended help in 2008.
(With inputs from Reuters)