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Warren Buffett's Berkshire Hathaway on Friday reached a deal to buy a reinsurer from Dutch financial-services giant ING for $433 million (300 million euros), part of a busy week in which the Omaha, Neb.-based investment group is opening a bond insurer and buying an industrial group.
As the Dutch firm wants to concentrate on its core insurance, banking and asset management business.
ING is taking a capital loss after tax of 100 million euros this year on the sale. Berkshire Hathaway didn't immediately issue a statement on its side of the deal.
NRG, formerly called Nederlandse Reassurantie Groep, hasn't taken on new business since 1993. NRG's life reinsurance subsidiaries have been sold and a number of the remaining insurance liabilities were successfully settled, ING said.
The deal comes on the same day that Berkshire Hathaway is opening Berkshire Hathaway Assurance, a bond insurer for cities, counties and states that issue bonds to finance sewer systems, schools, hospitals and other public projects, The Wall Street Journal reported.
Many bond insurers have run into difficulty with their triple-A credit ratings in jeopardy because of the increased risk from the mortgage-related bonds they insure, which could potentially erode their capital.
The bond insurer unit will begin operations in New York before moving to California, Puerto Rico, Texas, Illinois and Florida, Buffett told the Journal.
"Ideally we'd be licensed in every state, but there's a limit to what we can do," Buffett told the newspaper.
On Christmas, Berkshire Hathaway announced a deal to buy 60% of Marmon Holdings, an industrial group owned by trusts benefiting members of the Pritzker family of Chicago, for $4.5 billion. The investment firm will buy the rest of the company over the next five to six years.
Marmon, with annual revenue of around $7 billion, holds more than 125 manufacturing and service businesses worldwide,
Berkshire Hathaway
Berkshire Hathaway is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that oversees and manages a number of subsidiary companies. Berkshire Hathaway's core business is insurance, including property and casualty insurance, reinsurance and specialty nonstandard insurance. The Company averaged a 25%+ annual return to its shareholders for the last 25 years while employing large amounts of capital and minimal debt.
Warren Buffett is the company's chairman and CEO. Buffett has used the "float" provided by Berkshire Hathaway's insurance operations (a policyholder's money which it holds temporarily until claims are paid out) to finance his investments. In the early part of his career at Berkshire, he focused on long-term investments in publicly quoted stocks, but more recently he has turned to buying whole companies. Berkshire now owns a diverse range of businesses including candy production; retail, home furnishings, encyclopedias, vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; and manufacture, import and distribution of footwear.
Friday, December 28, 2007
Thursday, December 27, 2007
Sallie Mae's stock, decladed sales raise $3 bln
Sallie Mae , the largest educational lending company in the United States, said it sold $1 billion of convertible securities and $2 billion of common stock, raising more money than it had expected to pay off bad derivatives bets.
Sallie Mae sold common stock at $19.65 a share, equal to the company's closing share price on Thursday. The common stock sale offering was increased from an originally planned $1.5 billion, signaling strong demand.
The mandatory convertible preferred securities will offer a dividend of 7.25 percent, until investors convert them into common stock, or until their mandatory conversion on Dec. 15, 2010.
Sallie Mae, formally known as SLM Corp, said on Wednesday it was issuing $2.5 billion of convertible preferred securities and common shares, with about $2 billion of the proceeds going to pay off derivatives known as equity forward contracts.
Sallie Mae used equity forwards as part of its share buyback plan for years. The contracts allowed the company to reduce the cost of buying back its shares as long as its stock price kept rising.
But if Sallie Mae's share price fell far enough, the company had to buy back a large number of shares at above-market prices.
In this case, Sallie Mae will use about $2 billion from its offering to buy back about 44 million shares, now worth closer to $865 million at current market prices. The rest of the proceeds will be used for general corporate purposes.
more news
Sallie Mae is launching public offerings of both common stock and mandatory convertible preferred stock to raise up to $2.5 billion in capital.
The Reston-based student lender, which manages $160 billion in education loans, plans to use about $2 billion of the net proceeds from the two proposed offerings to settle its outstanding equity forward purchase contract, pursuant to which Sallie Mae will repurchase more than 44 million shares of common stock, the company said in a statement.
Sallie Mae (NYSE: SLM), formally known as SLM Corp., said any proceeds remaining from the public offerings after settling this contract will be used for general corporate purposes.
UBS Investment Bank and Citi will serve as joint book-running managers for the offerings, which include the issuance of $1.5 billion of common stock and $1 billion of convertible preferred stock.
Separately, Sallie Mae disclosed in a regulatory filing the terms and conditions of a separation agreement with Kevin Moehn, the company's executive vice president of sales and originations, who is leaving Sallie Mae.
Moehn will receive a cash payment totaling $1.5 million as well as a cash bonus of $285,000. He has also agreed to provide consulting services for 12 months following his termination of employment for a monthly fee of $16,500, Sallie Mae said in a filing with the Securities and Exchange Commission.
The agreement also provides that Moehn will not compete with Sallie Mae for six months following his termination of employment, and that he will not solicit or hire company employees for 24 months following his termination of employment.
Earlier this month, Sallie Mae announced that Moehn and June McCormack, the company's executive vice president of servicing, technology, sales and marketing, would be leaving the firm. Sallie Mae has promoted two executives to replace them.
Stock in Sallie Mae fell more than 11 percent on Thursday, to close at $19.65 per share. The company's shares have fallen about 43 percent in the last month and more than 57 percent over the past year.
Investors haven't reacted well to news that Sallie Mae's proposed acquisition by two private equity firms and two banks is not going through.
In April, the buyout group of J.C. Flowers & Co. LLC, Friedman Fleischer & Lowe LLC, Bank of America Corp. (NYSE: BAC) and JPMorgan Chase & Co. (NYSE: JPM) agreed to purchase Sallie Mae for about $25 billion.
The buyout group sent a revised offer to Sallie Mae's board in October, arguing that new legislation which cuts federal subsidies to student lenders could materially hurt Sallie Mae's financial performance.
Sallie Mae's board didn't accept the revised -- and lower -- offer. The Reston company then filed a lawsuit against the buyout group, seeking a $900 million breakup fee that was part of the original deal.
In recent weeks, Sallie Mae said that it held discussions with representatives of the buyout group to resolve their dispute. But the buyout group indicated to Sallie Mae that it would not submit a new proposal to buy the student lender, according to Sallie Mae.
Sallie Mae sold common stock at $19.65 a share, equal to the company's closing share price on Thursday. The common stock sale offering was increased from an originally planned $1.5 billion, signaling strong demand.
The mandatory convertible preferred securities will offer a dividend of 7.25 percent, until investors convert them into common stock, or until their mandatory conversion on Dec. 15, 2010.
Sallie Mae, formally known as SLM Corp, said on Wednesday it was issuing $2.5 billion of convertible preferred securities and common shares, with about $2 billion of the proceeds going to pay off derivatives known as equity forward contracts.
Sallie Mae used equity forwards as part of its share buyback plan for years. The contracts allowed the company to reduce the cost of buying back its shares as long as its stock price kept rising.
But if Sallie Mae's share price fell far enough, the company had to buy back a large number of shares at above-market prices.
In this case, Sallie Mae will use about $2 billion from its offering to buy back about 44 million shares, now worth closer to $865 million at current market prices. The rest of the proceeds will be used for general corporate purposes.
more news
Sallie Mae is launching public offerings of both common stock and mandatory convertible preferred stock to raise up to $2.5 billion in capital.
The Reston-based student lender, which manages $160 billion in education loans, plans to use about $2 billion of the net proceeds from the two proposed offerings to settle its outstanding equity forward purchase contract, pursuant to which Sallie Mae will repurchase more than 44 million shares of common stock, the company said in a statement.
Sallie Mae (NYSE: SLM), formally known as SLM Corp., said any proceeds remaining from the public offerings after settling this contract will be used for general corporate purposes.
UBS Investment Bank and Citi will serve as joint book-running managers for the offerings, which include the issuance of $1.5 billion of common stock and $1 billion of convertible preferred stock.
Separately, Sallie Mae disclosed in a regulatory filing the terms and conditions of a separation agreement with Kevin Moehn, the company's executive vice president of sales and originations, who is leaving Sallie Mae.
Moehn will receive a cash payment totaling $1.5 million as well as a cash bonus of $285,000. He has also agreed to provide consulting services for 12 months following his termination of employment for a monthly fee of $16,500, Sallie Mae said in a filing with the Securities and Exchange Commission.
The agreement also provides that Moehn will not compete with Sallie Mae for six months following his termination of employment, and that he will not solicit or hire company employees for 24 months following his termination of employment.
Earlier this month, Sallie Mae announced that Moehn and June McCormack, the company's executive vice president of servicing, technology, sales and marketing, would be leaving the firm. Sallie Mae has promoted two executives to replace them.
Stock in Sallie Mae fell more than 11 percent on Thursday, to close at $19.65 per share. The company's shares have fallen about 43 percent in the last month and more than 57 percent over the past year.
Investors haven't reacted well to news that Sallie Mae's proposed acquisition by two private equity firms and two banks is not going through.
In April, the buyout group of J.C. Flowers & Co. LLC, Friedman Fleischer & Lowe LLC, Bank of America Corp. (NYSE: BAC) and JPMorgan Chase & Co. (NYSE: JPM) agreed to purchase Sallie Mae for about $25 billion.
The buyout group sent a revised offer to Sallie Mae's board in October, arguing that new legislation which cuts federal subsidies to student lenders could materially hurt Sallie Mae's financial performance.
Sallie Mae's board didn't accept the revised -- and lower -- offer. The Reston company then filed a lawsuit against the buyout group, seeking a $900 million breakup fee that was part of the original deal.
In recent weeks, Sallie Mae said that it held discussions with representatives of the buyout group to resolve their dispute. But the buyout group indicated to Sallie Mae that it would not submit a new proposal to buy the student lender, according to Sallie Mae.
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