Buffett to Make Tidy Profit on Planned Merger

What will Warren do now?

No stockholder has more of an interest in the proposed merger of Wells Fargo & Co. and Norwest Corp. than billionaire Warren Buffett, the legendary Omaha investor whose operating vehicle is Berkshire Hathaway Inc.

Buffett is Wells Fargo’s biggest stockholder with an 8% stake, or about 6.7 million shares. He’s turned a paper profit of more than $2 billion on the stock since he began amassing his stake eight years ago.

Under the banks’ merger plan, Berkshire and other Wells Fargo holders will get 10 shares of Norwest for each of their Wells Fargo’s shares. Norwest closed Monday at $36.81 a share in New York Stock Exchange composite trading, so Buffett’s shares are currently worth $368 apiece, or $2.46 billion. (Wells Fargo closed at $365.75, up $2.50, on the Big Board.)

Berkshire paid $413 million, or an average $61.67 a share, for its Wells Fargo stock, according to Berkshire’s latest government filings. After the merger, Berkshire would remain a major holder in the new company--which would keep the Wells Fargo name--but with a much smaller stake on a percentage basis.

Exactly what percentage wasn’t immediately clear, as spokesmen for both banks said they didn’t know exactly how many total shares the new company will have outstanding. However, they said Buffett and Wells Fargo’s other investors would own about 52.5% of the new company.

That is, unless Buffett decides to sell some or all of his Wells Fargo shares before the merger is completed, or shortly thereafter. But Buffett had no immediate comment on his plans, and Berkshire officials did not return calls seeking comment.

At a news conference, Wells Fargo Chairman and CEO Paul Hazen said he talked to Buffett to alert him to the merger but declined to elaborate. Richard Kovacevich, Norwest’s chairman and chief executive, said “we’re pleased” to have Buffett as an investor in the new company, but he took issue with a reporter’s suggestion that he would now “be watched more closely” with Buffett as a stockholder.