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Berkshire’s Columbia Insurance to invest $303m in Home Capital

IBR Staff Writer Published 23 June 2017

Warren Buffett’s Berkshire Hathaway, through its subsidiary Columbia Insurance, has agreed to invest about C$400m ($302.8m) for a 38.39% stake in Home Capital Group.

Initially, Columbia Insurance will invest C$153.2m ($116m) to acquire 16 million shares for a 19.99% stake. Later on, it would make an additional investment of C$246.8m ($186.8m) in Home Capital Group to acquire nearly 24 million common shares.

Berkshire chairman and CEO Warren Buffett said: “Home Capital’s strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment.”

According to Home Capital, the additional investment from Berkshire would need approval by a majority of the latter’s shareholders, the outcome of which is likely to be known in September this year.

It would also be subject to other customary closing conditions and also the Canadian Competition Act clearance.

Home Capital board of directors chair Brenda Eprile said: “Since April, the Board has been diligently exploring solutions to restore the confidence of depositors and shareholders and to create stability and value for all of the Company’s stakeholders. This is a very important step on that road.

“This investment from Berkshire not only addresses Home Capital’s near-term requirements for additional liquidity and a lower-cost credit agreement, but also facilitates what the Board feels is the best available path to long-term success.”

Under the agreement, Berkshire will not have any rights to nominate directors of Home Capital or any governance rights as a stake holder.

However, Berkshire will hold customary registration rights for any deals with a significant shareholder.

Along with the investment agreement inked by the parties, Home Capital has agreed to enter into a new C$2bn ($1.5bn) loan facility with another Berkshire subsidiary.

A portfolio of mortgages originated by Home Trust Company has been placed as security by Home Capital against the loan.

Image: Berkshire Hathaway headquarters in Kiewit Plaza, Omaha, Nebraska, US. Photo: courtesy of JonClee86/Wikipedia.org.