Warren Buffett to invest in GE

Conglomerate will raise $12B through stock sale, gives Buffett's Berkshire Hathaway option of investing $6B in firm.

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By David Ellis, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- General Electric said Wednesday it intended to raise $12 billion through a common stock offering, in addition to plans to allow billionaire investor Warren Buffett's Berkshire Hathaway to buy up to $6 billion in stock.

GE (GE, Fortune 500) shares, which were halted ahead of the news, moved off their lows but were still down over 2% in afternoon trading.

GE CEO Jeff Immelt said the transaction would enhance the firm's flexibility and allow it to "play offense in the market, should conditions allow."

The GE chief also hinted that the company faced little impact from the ongoing credit crunch, saying it continued to meet its short-term financing needs.

Besides the $12 billion common stock sale, which is scheduled to be priced ahead of Thursday's market open, Berkshire Hathaway (BRKA, Fortune 500) will acquire $3 billion in preferred stock. Buffett's firm will collect a 10% dividend on those shares.

At the same time, Berkshire Hathaway would receive warrants to buy $3 billion of common stock at $22.25 per share for up to five years. GE's stock traded at about $24.85 in late day trading Wednesday.

Buffett, whose firm recently invested $5 billion in the Wall Street icon Goldman Sachs (GS, Fortune 500), called GE "the symbol" of American business with strong global brands and business divisions.

"I am confident GE will continue to be successful in the years to come," Buffett said in a statement.

Buffett's investment comes at what has been a tough time for GE. Less than a week ago, the firm - which produces everything from aircraft engines to refrigerators, in addition to entertainment programming via its NBC television network - lowered its earnings guidance for both the third quarter and the full year.

In April, the industrial conglomerate, widely viewed as a proxy for the U.S. economy, missed forecasts when it reported its first-quarter earnings. Shortly thereafter, a number of analysts began calling for a breakup of the company.

That's not to mention the company's stock price. So far this year, GE shares have lost nearly a third of their value. To top of page

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