Buffett gives Goldman $5 billion boost

Berkshire Hathaway Inc., the investment company run by Warren Buffett, has invested $5 billion in The Goldman Sachs Group Inc. in a move to provide a liquidity infusion to the venerable Wall Street firm and a vote of confidence to the financial markets.

Under the agreement, the Omaha, Neb.-based company will purchase $5 billion of perpetual preferred stock that carries a 10% dividend.

In conjunction with the offering, Berkshire Hathaway will also receive warrants to purchase $5 billion of common stock at $115 a share over the next five years.

Additionally, Goldman plans to raise at least $2.5 billion in a common stock offering.

The announcement came one day after Morgan Stanley signed a letter of intent to sell up to a 20% stake in the company to Tokyo-based Mitsubishi UFJ Financial Group Inc. (InvestmentNews, Sept. 22).

On Sunday, New York-based companies Goldman and Morgan Stanley received approval from the Federal Reserve to become bank holding companies

“Goldman Sachs is an exceptional institution,” Mr. Buffett, chairman and chief executive of Berkshire Hathaway, said in a statement.

“It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance.”

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