Berkshire cuts Wells stake to get below Fed’s limit

Warren Buffett’s Berkshire Hathaway is cutting its stake in Wells Fargo to less than 10 percent after the Federal Reserve told the billionaire’s company that remaining above that threshold would limit its ability to do business with the bank.

Berkshire sold 7.13 million shares of Wells Fargo this week and plans to divest an additional 1.87 million in the near future, the Omaha, Nebraska-based company said Wednesday in a statement. Buffett’s company oversaw about 500 million shares as of Dec. 31, valued at more than $27 billion at the time.

“These sales are not being made because of investment or valuation considerations,” Berkshire said in the statement. “Rather, they are solely motivated by the desire to return to a percentage ownership below the 10 percent notification threshold.”

U.S. rules have long curtailed the influence of outsiders on banks. None of the other top four lenders in the nation can claim a single investor with a holding the size of Buffett’s Wells Fargo stake. The billionaire disclosed in a filing last year that his position climbed to 10 percent because the bank had been buying back its own stock. Berkshire is listed in Wells Fargo’s proxy filing among major shareholders that have business relationships with the San Franciscobased company in segments such as lending, investment banking and insurance.

“After several months of discussions with representatives of the Federal Reserve, we have concluded that the commitments that would be required of us by the Federal Reserve to retain ownership of 10 percent or more of Wells Fargo’s outstanding common stock would materially restrict our commercial activity with Wells Fargo,” Berkshire said in the statement. “Therefore, it would be simpler to keep our ownership below 10 percent.”

Berkshire applied last year to expand the stake beyond 10 percent, saying the company had no plans to merge the bank with another firm or make significant changes to the lender’s strategy or corporate structure.