GE to raise US$15bil via stock sales

BOSTON: General Electric Co plans to raise US$15bil through stock sales €“ including US$3bil from Warren Buffett €“ to improve liquidity and give it the option of more acquisitions at a time of intense market turmoil, the US conglomerate said on Wednesday.

The news helped erase some of the day’s slide in GE shares, which fell more than 9% earlier, but was not enough to push them into positive territory. Investors remained worried about the troubles at GE’s vast finance arm €“ which has businesses ranging from loans to mid-sized business to investing in real estate.

It was the second big strategic investment by Buffett’s Berkshire Hathaway Inc in the battered finance sector in as many weeks. Last week, Berkshire said it would invest US$5bil in Wall Street’s Goldman Sachs Group Inc.

“GE is the symbol of American business to the world,” Buffett, one of America’s most famous investors, said in a statement. “I am confident that GE will continue to be successful in the years to come.”

The move was a sign that GE was looking to shore up its finances as the US faced what could be its worst financial storm since the Great Depression, investors said.

“It’s an insurance policy in case things get worse,” said Wayne Titche, co-manager of the AHA Diversified Equity Fund, part of AMBS Investments, which counts GE among its holdings. “It just shows how jittery the market is that a firm triple-A rated (company) like General Electric feels that it needs to raise that extra cushion. But in today’s market, better safe than sorry.”

Berkshire is buying US$3bil of preferred GE shares that carry a 10% dividend, and also has the option to buy another US$3bil of GE common stock at US$22.25 per share €“ slightly above the 52-week low of US$22.19 it hit last month.

GE, which has a US$245bil market capitalisation, is the second most valuable publicly traded US company.

“What Buffett has been waiting for years is finally happening: A period of sufficient market distress where he can negotiate terrific financial terms for Berkshire,” said James Armstrong, president and portfolio manager at Henry H. Armstrong Associates in Pittsburgh, which holds a stake in Berkshire Hathaway.

“The reason he’s buying so much right now is he’s getting extremely attractive prices. He has been waiting for this for 10 years,” Armstrong said.

GE confirmed its forecast of last week that troubles at GE Capital, which accounts for more than half its profit, would offset strong growth in sales of high-tech products like jet engines and electricity-generating turbines, leaving 2008 profit down as much as 12%. €” Reu