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Buffett’s latest move secures $1 billion plus profit

Billionaire investor Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B) is now one of the top ten investors in investment bank Goldman Sachs (NYSE: GS), after a deal closed yesterday which will have Buffett’s existing options turned into shares.

According to The Australian:

The legendary stockpicker is taking a 2 per cent stake in the Wall Street bank effectively for free in a deal resolving a huge loan made by him to Goldman in September 2008.

Under the terms of an agreement reached nearly five years ago, the Sage of Omaha paid $US5bn for options to buy shares in Goldman later this year at a pre-agreed price.

Mr Buffett, who is estimated to be worth $US53.5bn, acknowledged at the time that he was taking advantage of an “economic Pearl Harbour”, but his support was an important boost to Goldman’s credibility when Wall Street was teetering on the brink of collapse.

He was granted options then to buy 43.5 million shares in Goldman at a price of dollars 115. The bank’s share price yesterday lunchtime was $US145.91, giving him a paper profit of $US1.35bn on these warrants.

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