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Monday, June 26, 2006 - Page updated at 06:56 AM

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Bulk of Buffett's fortune goes to Gates Foundation

Seattle Times business reporter

Warren Buffett, the world's second-richest person, will merge his fortunes with those of his friend Bill Gates in an effort to solve some of the worst problems of global health and education.

Buffett stunned the business and philanthropic worlds when he disclosed his decision Sunday to begin giving away 85 percent of his estimated $44 billion fortune next month — most of it to the Bill & Melinda Gates Foundation.

The gift to the foundation — 10 million shares worth nearly $31 billion now — over time could more than double the assets of the Seattle-based Gates Foundation, already the world's largest philanthropic organization with about $29 billion in assets.

Buffett, 75, has said for years that his vast stock wealth from his company, Berkshire Hathaway, would fund philanthropy after his death, and he was expected to leave it to his own charity.

Founded in 2000, the Gates Foundation has focused on strengthening education, reducing poverty and improving public health, with special focus on HIV, malaria and tuberculosis.

"We are awed by our friend Warren Buffett's decision to use his fortune to address the world's most challenging inequities, and we are humbled that he has chosen to direct a large portion of it to the Bill & Melinda Gates Foundation," the couple said Sunday in a statement.

The first annual donation, expected to be about $1.5 billion, would go to the foundation this year, doubling its annual contributions.

It's the first time anyone other than Bill and Melinda Gates has contributed to the foundation.

Buffett stipulated that at least one of the Gateses must be involved in the foundation for payments to continue.

The couple, friends with Buffett for 15 years, have said his advice has had a major influence on them.

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Buffett introduced Bill Gates to bridge and asked him to serve on the board of Berkshire Hathaway after Buffett's wife, Susan, died in July 2004. Both Buffett and Melinda Gates are on the board of The Washington Post Co.

Now Buffett will join the Gates Foundation board.

Buffett had been expected to leave most of his wealth to the Susan Thompson Buffett Foundation, begun by him and his wife. It has given millions to hospitals, universities and teachers, as well as to Planned Parenthood and other abortion-rights groups.

Instead, the wealth will be split among five foundations: the Gates Foundation, the Susan Thompson Buffett Foundation and three others in which Buffet's three children are involved. They support various issues like the environment, nuclear nonproliferation and education.

Buffett told Fortune magazine his wife's death influenced his decision to start giving his money away now, and that he was impressed with the work of Bill and Melinda Gates. And he decided it would be easier to give to a large foundation instead of trying to expand his own foundation.

"You have committed yourselves to a few extraordinarily important but underfunded issues, a policy that I believe offers the highest probability of your achieving goals of great consequence," Buffett wrote in a letter to the couple dated today and posted on the Berkshire Hathaway Web site. Doubling the foundation's present spending can increase its effectiveness, he added.

"Working through the foundation, both of you have applied truly unusual intelligence, energy and heart to improving the lives of millions of fellow humans who have not been as lucky as the three of us," he wrote. "You have done this without regard to color, gender, religion or geography. I am delighted to add to the resources with which you carry on this work."

Some who work closely with the Gates Foundation said that combining their efforts seemed natural: For both the savvy investor and the technology wizard, results matter.

In October, the foundation announced it was stepping up the fight against malaria with $258 million in research grants, the largest amount going to Seattle-based PATH to develop what could be the world's first malaria vaccine.

The foundation is on track to outpace the U.S. government in funding for malaria research, contributing one-third of the world's annual budget.

The foundation approaches the problem with a sense of urgency and desire for results, asking "How can we have more impact, how can we do more?" said Dr. Melinda Moree, who directs the malaria initiative at PATH. That urgency must have resonated with Buffett, she said.

"For someone who's made billions and billions of dollars, putting it in hands of someone with that kind of approach, it must have seemed like a good bet for him," Moree said. The impact of the gift "will not be fully understood for decades," Bill and Melinda Gates said in their statement.

Earlier this month, Microsoft co-founder Gates, the world's richest man, announced he would be ending a full-time role at Microsoft in 2008 to focus most of his time on the foundation. Buffett said the timing of the two announcements was not related.

"What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it?" Buffett told Fortune. "Who wouldn't select Tiger Woods to take his place in a high-stakes golf game? That's how I feel about this decision about my money."

Berkshire's chairman and CEO said he plans to give away 12,050,000 Class B shares of Berkshire stock to the five foundations, but he will have to convert some of his 474,998 Class A shares to complete the gifts. One Class A share, which sold for $92,100 Friday, can be converted into 30 Class B shares, which sold for $3,071 Friday.

Buffett plans to give each foundation 5 percent of his total pledge each year in July.

In the interview with Fortune, Buffett acknowledged the foundations may sell off the Berkshire stock to raise cash. But he said he doesn't think that will affect the price of the stock because the gifts will be spread over time.

"I would not be making the gifts if they would in any way harm Berkshire's shareholders," Buffett told Fortune. "And they won't."

Buffett's health has been the subject of speculation. He has said a succession plan is in place at Berkshire but refuses to name a successor.

In the letters, Buffett wrote, "My doctor tells me that I am in excellent health, and I certainly feel that I am."

Berkshire owns more than 60 companies, including insurance, furniture, carpet, jewelry, food and utility firms. It has major stakes in such companies as H&R Block, Anheuser-Busch and Coca-Cola.

Kristi Heim: 206-464-2718 or kheim@seattletimes.com

The Associated Press contributed to this report.

Copyright © 2006 The Seattle Times Company

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