Buffett’s Berkshire to buy Burlington Northern in $44 billion deal

Warren Buffett's Berkshire Hathaway on Tuesday said it agreed to buy Burlington Northern Santa Fe for $34 billion plus $10 billion in assumed debt.

Berkshire Hathaway already owns a 22.6 percent stake in Burlington Northern and said it will pay $100 a share for the rest of America's second-largest rail operator.

The majority of the stock issued in the deal will be Berkshire's A shares. But Berkshire's board also approved a 50-for-1 split of its Class B common stock for holders of smaller amounts of Burlington shares who opt for a share exchange rather than cash. Berkshire's Class B shares closed Monday at $3,265. With the split, each share will be worth $65.30.

Burlington shares closed Monday at $76.07. They shot up 28 percent to 97.59 in late morning trade.

Both companies' boards have approved the deal. It would be the biggest acquisition ever for Berkshire.

"It's an all-in wager on the economic future of the United States," Buffett said in the statement announcing the deal.

Berkshire had building its stake in Burlington Northern over the past two years.

Berkshire also owns MidAmerican Energy, which controls power companies in the Midwest and Pacific Northwest. The railroad could be a strategic acquisition because its tracks run right through both regions, a major coal supply route for power plants.

The chairman of MidAmerican Energy has come out vocally against climate change legislation that targets coal-fired power plants.

Rail, meanwhile, is far more energy-efficient that shipping by truck or air.

Burlington Northern had a market capitalization of about $25.9 billion before the deal.

Last month the company said Q3 profit dropped 30 percent to $488 million, or $1.42 a share, as people continued to hold back on purchasing goods from stores and industrial production continued to struggle.

Shares of rival rail operators rallied on the takeover deal. Union Pacific, Norfolk Southern and CSX all enjoy solid gains in late-morning trade.

Source: Investors.com
   

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