Home Capital's Billionaire Warren Buffett plan opposed by shareholder proxy ISS

Home Capital benefited from Buffett's initial investment as well as from a C$2 billion credit facility. The deal helped rebuild confidence in the financial strength of the company after depositors withdrew funds from its high-interest savings and Guaranteed Investment Certificate accounts.

TORONTO: Home Capital Group Inc could face a revolt over U.S. billionaire Warren Buffett's plan to increase his stake in the business after proxy advisory firm Institutional Shareholder Services (ISS) recommended voting against it.

Home Capital and Buffett's Berkshire Hathaway Inc investment vehicle agreed in June to a deal worth up to C$400 million ($318 million) for an initial stake of 20 percent in the business. The position could increase to 38 percent if Home Capital shareholders give approval in a vote on Sept. 12.

Under the terms of the deal, Berkshire Hathaway can purchase the additional shares at a price of C$10.30 per share. Shares in Home Capital rose 1 percent to C$13.37 on Wednesday.

Home Capital benefited from Buffett's initial investment as well as from a C$2 billion credit facility. The deal helped rebuild confidence in the financial strength of the company after depositors withdrew funds from its high-interest savings and Guaranteed Investment Certificate accounts.

Home Capital's executives had emphasized the importance of having an investor of Buffett's credibility backing the company.

However, ISS said much of the benefit was already in place after the initial transaction and questioned the benefits for Home Capital's shareholders of Buffet increasing his stake.

"The proposed Berkshire second tranche appears to offer nominal additional reputation and strategic benefits to those already established under the Berkshire first tranche, while dilution cost of the discounted second tranche is substantial," ISS said in a statement.

Home Capital urged shareholders to vote in favor of the deal.

"The board believes that this level of ownership will lead to a stronger commitment from Berkshire to the long-term success of Home Capital," it said in a statement on Wednesday.

Another Proxy adviser firm, Glass Lewis, also recommended that Home Capital shareholders vote in favor.

"We believe the additional capital provided by the private placement will provide the company with sufficient flexibility to pursue its strategy, which we believe is in the best interests of shareholders," Glass Lewis said in a statement.

Investors withdrew more than 90 percent of funds from Home Capital's high interest savings accounts earlier this year.

The withdrawals accelerated after April 19, when the Ontario Securities Commission, accused Home Capital of making misleading statements to investors about its mortgage underwriting business.

Home Capital reached a settlement with the commission in June and accepted responsibility for misleading investors. - Reuters

Buffett made the following comments in a CNBC interview with BECKY QUICK:

"I would guess we're in about a 2 percent growth economy now. And, as I've said, every now and then we think it's accelerating, and every now and then we think maybe there's a double dip or something, and it just seems to be a couple percent. And certain industries will pick up quite fast. The autos caught on faster than homes, but now they're tailing down. But 2 percent is not bad, incidentally."

"It's sort of unbelievable that rates have stayed down. I mean, it's not what anybody expected. At least, I didn't expect that. And the other people at Berkshire didn't expect that."

"I worked for Hillary. I raised money for Hillary. I voted for Hillary. I was disappointed when she lost. But we have a president, and we have North Korea, we have a whole bunch of things. I am not in a business of attacking any president, or do I think I should be. I've lived under 15 presidents, believe it or not. There have been 45 presidents of the United States, and I've lived under a third of them. And I've bought stocks net under 14 of the 15. The first one was Hoover, and I was only two when he left, so I hadn't gotten active at that point. But Roosevelt came next, and I bought stocks under him, even though my dad thought it was the end of the world when he got elected. And I bought, I bought stocks under 14 out of 15. So, this country will move forward. But it's, it is important the government functions well. It's important that, that - both from the government side and from the private side - that they try to figure out how to maximize the degree to which this country moves forward."

"Certain industries will pick up quite fast. The autos caught on faster than homes, but now they're tailing down. But 2 percent(economic growth) is not bad, incidentally."

On Harvey: "I don't think it will be a full percentage point for a year, or anything like that. But it has a real effect. It destroys wealth. If there's a 150 billion or something of uninsured losses that's, that's real wealth. But, we are a very wealthy country, and we create wealth for them at a big rate too."

"I saw a figure the other day of 14 million, 14 trillion gallons of water being dropped from the skies. That's equal to 2000 gallons of water for every man, woman and child on the planet. So, it's staggering. And the insured loss will be large. There will be a lot of uninsured loss too because of flood. A lot of people have coverage with the National Flood operation."

Reuters also reported:

Billionaire investor Warren Buffett told CNBC on Wednesday that he had not sold a share of Apple and was not concerned about Wells Fargo as a long-term investment, calling it a "terrific" bank.

Buffett, chairman and chief executive of conglomerate Berkshire Hathaway Inc, said about Apple compared to IBM: "I feel more certain about the future as I look at a company like Apple than when I look at IBM now."

Berkshire has disclosed a roughly $20 billion stake in Apple. Buffett owned about 81 million shares of IBM at the end of 2016 and sold about a third of them in the first and second quarters of 2017, CNBC reported in May, citing Buffett.

Buffett also said Wednesday that he continued to have faith in investments in Bank of America Corp and Wells Fargo. Berkshire has become Bank of America's largest shareholder by exercising its right to acquire 700 million shares at a steep discount, more than tripling an investment it made six years ago.

When asked if U.S. food company Kraft Heinz would buy Mondelez, Buffett said: "I think the answer is no on that." He also said Kraft Heinz, which Berkshire controls along with Brazilian firm 3G Capital, would not again seek to buy Unilever Plc.

Kraft Heinz withdrew its proposal for a $143 billion merger with larger rival Unilever Plc, the companies said in February. Following a six-month cooling off period required by UK takeover law which expired this month, there has been speculation over whether Kraft Heinz would come back for another shot at Anglo-Dutch consumer goods giant Unilever.

"That was a misunderstanding, basically. We will not make hostile takeover offers, and we did not intend that to be hostile, but it turned out it was, and we immediately the next day, when I learned about it, we called it off," Buffett said on Kraft Heinz's bid.

When asked why he was silent about U.S. President Donald Trump's administration, Buffettsaid: "I am not in the business of attacking any president, nor do I think I should be." He had supported Hillary Clinton in last year's presidential election. - Reuters