Buffett Takes A Ride On the Burlington Northern (BNI) Railroad, Announces $44 Billion Takeover
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In a surprise move this morning, Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.a) (NYSE: BRK.B) has agreed to purchase Burlington Northern Santa Fe Corp. (NYSE: BNI) for a price tag of $44 billion, including $10 billion of outstanding BNSF debt. This is the largest acquisition ever by Buffet's company.
Berkshire Hathaway will pay $100 a share in the purchase of the railway company, excluding the 22 percent that Buffet's company already owns.
The deal will be primarily composed of Berkshire's "A" share, while the board also approved a 50-1 split of the Company's Class B common stock. On Monday the Berkshire "B" shares closed at $3,265, but after the split each share will be worth around $65.30, based on the current market price.
Shares of Burlington have been driven up by the news, up 29 percent in premarket movement.
"Our country's future prosperity depends on its having an efficient and well-maintained rail system," said Buffet, Berkshire Hathaway chairman and CEO. "Conversely, America must grow and prosper for railroads to do well. Berkshire's $34 billion investment in BNSF is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry.”
"Most important of all, however, it's an all-in wager on the economic future of the United States," said Mr. Buffett. "I love these bets."
The move comes at a time when the profit for Burlington is dropping. The third-quarter results reported last month showed that profit for the company had dropped 30 percent to $88 million, or $1.42 per share.
Boards for both of the companies have approved the deal.
Shares for Burlington have moved up 29 percent to $98.02 in premarket trading. Berkshire Hathaway Class A shares are up 0.25 percent to $99,000.00, while Class B share are moving up 1.44 percent to $3,312.00.
News of the deal has other rail companies on the move today also: Union Pacific Corp. (NYSE: UNP) is up 6 percent, CSX Corp. (NYSE: CSX) is up 7 percent, Kansas City Southern (NYSE: KSU) is up 7 percent, and Norfolk Southern Corp. (NYSE: NSC) is up 6 percent.
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Let Buffet Ring The Bell and Blow The Whistle
Aloyusis P. McGillicuddy on Nov 3, 2009 06:04 PMToday's announcement by Mr. War-ren Buffet to purchase ALL of the common stock of BNSF can be viewed as a cost saving strategy. No longer will he have to pay exhor- bitant CPA auditing fees; the high cost of priniting and distributing AR's along with supporting state- ments; eliminate phony monthly guesses of the RR's performance for the Vultures and Buzzards of the perverted financial investment firms while, at the same time, preventing a raid on the corporate treasury by outside forces. Not a bad play. Now will there be a rise in the bet from that backward railroad in downtown Omaha?