GE Sets Oct. 17 for $3.3 Billion Buffett Stake Redemption

General Electric Co. (GE) set a date of Oct. 17 for a $3.3 billion payment to repurchase preferred stock sold to Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) as financial markets froze in October 2008.

The shares, callable after three years at a 10 percent premium, helped Chief Executive Officer Jeffrey Immelt raise another $12 billion from public markets two weeks after Lehman Brothers Holdings Inc. filed for bankruptcy. GE disclosed the date today in a U.S. regulatory filing.

Buying back the stake is a priority for Immelt and Chief Financial Officer Keith Sherin, who told investors on a July conference call that Fairfield, Connecticut-based GE is concentrating on using cash in the near term to repurchase common shares and increase the dividend.

“This will allow them more flexibility to potentially increase the dividend,” said Nicholas Heymann, an analyst with William Blair & Co. in New York who has a “market perform” rating on the stock. The quarterly payout is 15 cents a share.

For Buffett, the redemption of the shares will mean an end to the 10 percent annual dividend that GE paid his Omaha, Nebraska-based Berkshire for the preferred stock. Sherin said last year that GE was considering an early repurchase of the shares to save an annual dividend payment of about $300 million.

Payment Breakdown

Next month’s payment for the preferred shares will be $3 billion for the stock plus a $300 million premium, GE said in the filing with the U.S. Securities and Exchange Commission.

At the time Buffett bought the preferred shares, he also acquired warrants to buy about $3 billion of common stock with a strike price of $22.25 a share for five years. GE rose 40 cents to $15.41 today in New York Stock Exchange composite trading.

GE slashed the dividend on its common shares in 2009 to help preserve cash, the first cut since 1938. Since then, GE has raised the dividend three times. The quarterly payout may rise to 17 cents in December, and to 20 cents by the end of 2012, according to a Bloomberg projection.

GE said in July it had $91 billion in cash on its balance sheet at the end of the second quarter.

To contact the reporters on this story: Rachel Layne in Boston at rlayne@bloomberg.net; Andrew Frye in New York at afrye@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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