General Electric Co. is interested in buying back the preferred shares it sold to Warren Buffett's Berkshire Hathaway Inc. before October 2011 but has not yet entered into negotiations on that point, a top GE executive said.
According to terms of the deal GE reached when it sold the stake to Berkshire for $3 billion during the financial crisis, the largest U.S. conglomerate cannot buy Buffett out before that time.
"It's not callable until October 2011, but we have said it would be a priority. After NBC closes, we think it would be a good use of that cash if we could retire that early," Chief Financial Officer Keith Sherin said in an interview. "But it's a negotiation between us and Berkshire and we have not entered into that."
GE expects to close its sale of a majority stake in its NBC Universal media business to Comcast Corp later this year.
Buffett's shares carry a 10 percent dividend that took $75 million off GE's profit in the third quarter and has cost the company a total of $600 million since GE sold him the stake in October 2008.
The Fairfield, Connecticut-based company's July move to raise its dividend by 20 percent reflects the board's desire to respond to "extraordinary events" and does not necessarily mark a change from GE's normal procedure of evaluating the payout each December, Sherin added.
"It hasn't been something that we have traditionally reviewed every quarter," he said. "Normally, we reviewed it in the December board meeting for the following year's increase. This year, I think, based on some of the extraordinary events, including having to cut the dividend in the financial crisis and then the strength of the company coming back, we reviewed it earlier."
He said that over the long term, GE aims to pay out 40 percent to 45 percent of its earnings to shareholders via the dividend.
The July increase, which came after GE reported a rise in second-quarter earnings that broke a nine-quarter streak of declines, boosted GE's dividend rate to 48 cents per year. That represents 38.7 percent of analysts' average earnings forecast of $1.24 per share, according to Thomson Reuters I/B/E/S.
GE in February 2009 cut its quarterly payout to 10 cents per share from 31 cents as it moved to conserve cash in the face of a global credit crunch.
The company Friday reported quarterly profit that topped Wall Street expectations, but its shares fell 5 percent on investor concern that its revenue dropped more sharply than expected.
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