Buffet buys into Home Cap.

Photo: The Canadian Press

Warren Buffet

Home Capital Group Inc. says American investment firm Berkshire Hathaway Inc. has agreed to indirectly acquire $400 million 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, has agreed to make an initial investment of $153.2 million to purchase just over 16 million common shares, which represents an equity stake of approximate 19.99 per cent in Home Trust.

Each common share will be issued at $9.55 per common share, which equals a 15 per cent discount to the five-day volume-weighted average price of the shares on the Toronto Stock Exchange as of June 13 when Bershire Hathaway, the firm led by famous American investor Warren Buffett, 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 on June 29.

The company also says Columbia Insurance has agreed to make an additional investment of $246.7 million to acquire almost 24 million common shares through a private placement.

Together, the investments represent an almost 39 per cent equity stake in Home Capital, although Berkshire has agreed that it will only cast votes based on 25 per cent of the shares it will hold.