Buffett to Invest $300 Million in Troubled Am Ex : Securities: One of America’s most respected businessmen will buy a block of preferred stock in American Express, giving the shaky firm a vote of confidence.

Super-investor Warren E. Buffett’s Berkshire Hathaway conglomerate gave American Express Co. a vote of confidence, with plans to pump $300 million into the stumbling financial giant, American Express said Thursday.

American Express agreed in principle to sell $300 million of preferred securities to Berkshire Hathaway Inc. or its subsidiaries. The shares will pay a fixed dividend of 8.5% and are convertible to common stock at any time at the option of American Express.

The investment will give Buffett about 2% to 3% of the company’s stock, a spokesman for American Express said.

Analysts saw the investment by one of the country’s most respected businessmen as symbolically important to American Express, which has been struggling to shape up its weak Shearson Lehman Bros. brokerage subsidiary and is facing mounting competition in the credit card field. American Express announced a 20% drop in profit for the second quarter, when it realized a loss of $144 million in its 28% stake in the troubled California insurer First Capital. In one of the largest failures of an insurance company ever, First Capital was seized by the state insurance commissioner in May, after junk bond investments helped make it insolvent.

In addition, American Express Chief Executive James Robinson’s previously sterling image has been dulled by increasing criticism of his performance and management style.

“Getting Buffett to come in with a relatively small investment is an attempt by Robinson to rebuild confidence,” said E. Wilson Davis, an analyst at Gerard Klauer Mattison. “It says: ‘This shrewd, intelligent, nuts-and-bolts investor has confidence in American Express.’ ”

Omaha-based Buffett is widely respected for both his investment acumen and down-home style. In contrast to corporate raiders of the 1980s, he has generally focused on friendly investments that have helped bolster companies.

Buffett will not be active in management of American Express, but Robinson said Thursday in a written statement that “we are looking forward to the benefits of his wise counsel on a variety of matters important to American Express and its shareholders.”

Buffett’s empire includes insurance, textile and newspaper companies. Last year he acquired a substantial stake in San Francisco-based Wells Fargo Bank, which he intends to increase.

While the Berkshire Hathaway cash infusion is part of an ongoing program to build capital at American Express, it is more important symbolically than in terms of raising cash, Davis said.

While $300 million “is a lot to most companies, it’s not that big to American Express, which has $6 billion in equity capital and earnings of $1 billion,” he said. Similarly, multibillionaire Buffett, counted as one of the country’s richest men, can easily afford an investment of this size.

Analysts said Buffett seemed to be following his usual pattern of buying stocks when they’re down and can probably expect a good profit. American Express stock is trading well below levels of a year ago. The Buffett announcement sent the stock up $1 a share Thursday to close at $26.375 on the New York Stock Exchange. That’s still well below its high last year of $35.25.

Berkshire Hathaway’s stock, always one of the highest-valued stocks on the New York Stock exchange, rose $25 to $8,550.

The American Express shares Buffet will buy must be redeemed for common shares within three years, unless the terms are extended for an additional year.

Buffett first invested in American Express 28 years ago, when its stock plunged from $60 to $34 after a now-obscure “salad-oil scandal” involving a subsidiary of Amex and some nonexistent oil. He figured that the company had good long-term prospects and bought $13 million of the stock.

“I’d be worth a lot less money today if I hadn’t run into American Express,” Buffett told the Associated Press.