Notable Mergers and Acquisitions of the Day 11/3: BRK.B/BNI, SWK/BDK, PEET/DDRX

November 3, 2009 10:28 AM EST

• 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.
  
  
• Stanley Works (NYSE: SWK) has agreed to acquired Black & Decker (NYSE: BDK) in a merger that will create an $8.4 billion global industrial leader in an all-stock transaction valued at $4.5 billion. The companies will be re-branded into Stanley Black & Decker in a deal that is expected to close sometime in the first half of 2010.
  
  The merger has caused a 20 percent jump in the stock price for Black & Decker in the after-hours market.
  
  Black & Decker shareholders will receive a fixed ratio of 1.275 shares of Stanley common stock for each share of Black & Decker common stock that they own as of October 30, 2009. This gives an implied premium of 22.1 percent to the Black & Decker share price.
  
  Upon closing Stanley shareholders will own approximately 50.5% of the equity of the combined company and Black & Decker shareholders will own approximately 49.5%.
  
  Chairman and CEO of Stanley, John F. Lundgren, will become President and CEO of the combined company. Nolan D. Archibald, Chairman, President and CEO of Black & Decker, will be Executive Chairman of the combined company.
  
  "This is a unique opportunity to bring together two great companies, each with first-rate brands, and provide enhanced opportunities to generate superior returns as we build on this new, larger platform," Lundgren said.
  
  The rationale for both companies for the merger is that the combined company will create a brand of tool with greater worldwide recognition, with strong appeal towards retailers, commercial customers and individual consumers.
  
  "Stanley and Black & Decker together will have a comprehensive offering across all major tool categories and greater resources to support continued expansion of our combined security and industrial businesses," Lundgren added.
  
  The deal will create EPS accreation if about $1 per shares by year three and $350 million in cost synergies are expected.
  
  Stanley has moved up 0.75 percent to $45.45, while Black and Decker has soared to $56.75, a 19.88 percent jump.
  
  
• Peet's Coffee & Tea, Inc. (NASDAQ: PEET) announced an agreement to acquire Diedrich Coffee, Inc. (NASDAQ: DDRX) for $26.00 per share or a total value of approximately $213 million.
  
  With this acquisition, Peet's will enter the rapidly growing single cup coffee market with strong specialty coffee brands helping to drive household penetration of the K-Cup brewer system by leveraging Peet's infrastructure and direct-store-delivery selling system. Diedrich, a wholesale coffee roaster and distributor, is almost exclusively focused on the production and sale of K-Cups(R) for Keurig Incorporated's top selling single-cup brewing system through a license with Keurig.
  
  Peet's will finance the acquisition through a combination of cash on hand (at both companies) and $140 million of committed debt financing. The acquisition is expected to be dilutive to earnings in 2010 and accretive thereafter. The exchange offer is currently expected to close by end of the calendar year 2009.
  
  This news could impact shares of Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR), which makes the Keurig single-cup brewing system.

To see all the Mergers & Acquisitions for today in real-time go to http://www.streetinsider.com/Mergers+and+Acquisitions

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