Canadian-based Home Capital Group Inc. (T.HCG) says Warren Buffett’s investment firm Berkshire Hathaway Inc.(NYSE: BRK.A) has agreed to acquire indirectly $400 million Canadian of its common shares in a private placement and provide a new $2-billion line of credit to its subsidiary, Home Trust Company.
Berkshire, through its wholly-owned subsidiary Columbia Insurance Company, will invest C$153.2 million to purchase just over 16 million common shares, which represents an equity stake of approximate 19.99% in Home Trust.
Each common share will be issued at $9.55 per common share, equivalent to a 15% discount to the five-day volume-weighted average price of the shares on the Toronto Stock Exchange as of June 13 when Bershire made its final proposal to the company.
Home Capital, a Toronto-based alternative mortgage company, says while the sale of the shares requires TSX approval, it does not need the blessing of shareholders and is expected to close next week.
The company also says Columbia Insurance has agreed to make an additional investment of C$246.7 million to acquire almost 24 million common shares through a private placement.
Together, the investments represent an almost 39% equity stake in Home Capital, although Berkshire has agreed that it will only cast votes based on 25% of the shares it will hold.
Home’s board said after considering numerous alternative proposals Berkshire transaction provided current shareholders with the “best available combination of transaction certainty and the potential for enhanced shareholder value.”
Berkshire shares tailed off by $1,210.00, soon after Thursday’s opening bell to sit at $253,190.00
