Berkshire Hathaway invests $5bn in Goldman Sachs

by David Masters

Story link: Berkshire Hathaway invests $5bn in Goldman Sachs

Warren Buffett, one of the richest men in the world, has announced plans to invest $5 billion in global bank Goldman Sachs.

The money is being invested on behalf of Buffett by his investment company, Berkshire Hathaway.

Berkshire could invest an additional $5 billion within the next five years if Buffett believes it will prove profitable.

Buffett’s choice to invest in the troubled bank is being seen as a sign of renewed confidence in the financial market; for over a year Buffett has refrained from investing in the tumultuous financial industry.

Share prices in Goldman have been falling fast this week, with a number of clients losing confidence and withdrawing funds.

Goldman has been putting together plans to ensure its survival by transforming itself into a traditional bank.

Buffett has negotiated a shrewd deal on his investment, winning himself an annual dividend of 10%, $500 million per year. Goldman’s ordinary annual dividend is just 1.1%.

In addition, Buffett has the option of buying up to $5 billion extra ordinary shares in Goldman anytime in the next five years for $115 per share.

Commenting on the deal, Buffett said Goldman Sachs is an ‘exceptional’ and well managed institution.

Seventy-eight year old Buffett plans to give the majority of his $62 billion net worth to charity.