Buffett’s firm buying rest of Fort Worth-based BNSF for $34 billion

By Staff and wire reports

Warren Buffett’s Berkshire Hathaway Inc. said Tuesday it’s making its biggest purchase ever by agreeing to pay $34 billion for the 78 percent of Fort Worth-based Burlington Northern Santa Fe Corp. that it doesn’t already own.

Buffett said the acquisition — the fourth Fort Worth company he has bought — is a bet on the recovery of the U.S. economy and the railroad’s management team. Earlier, his publicly traded investment company took over Fort Worth’s Justin Boots and Acme Brick in 2000, then the electronic parts distributor TTI in 2006.

"Berkshire’s $34 billion investment in BNSF is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry," Buffett said in a statement.

"Most important of all, however, it’s an all-in wager on the economic future of the United States. I love these bets," he said.

BNSF, the nation’s second-largest railroad, is the biggest hauler of food products like corn and coal for electricity, making it an indicator of the country’s economic health. The railroad also ships a large amount of goods from Western ports including everyday items such as refrigerators, clothing and TVs.

"We are thrilled to have the opportunity to become a part of the Berkshire Hathaway family," Rose said in a statement.

"We admire Warren’s leadership philosophy supporting long-term investment that will allow BNSF to focus on future needs of our railroad, our customers and the U.S. transportation infrastructure," BNSF’s CEO added. "This transaction offers compelling value to our shareholders and is in the best interests of all of our constituents including our customers and employees."

Analysts say Buffett is planting both feet in an industry that is poised to grow as the economy gets back on solid ground. If approved, it would be the biggest acquisition ever for Berkshire Hathaway.

Berkshire Hathaway already owns about 22 percent of Burlington Northern, and said it will pay $100 a share in cash and stock for the rest of the company, a 31.5 percent premium on Monday closing stock price. Shareholders have the option to convert their stock for a cash payment of $100 per share or receive Berkshire Class A or Class B common stock. Up to 60 percent of the deal is cash and 40 percent is in stock.

The majority of the stock 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 shot up $21.33, or 28 percent to $97.40 in morning trading. Shares of other major rails, including Burlington’s larger rival Union Pacific Corp., rose as well.

Berkshire also owns stock in two other major U.S. railroads — 9.56 million shares of Union Pacific Corp. and 1.93 million shares of Norfolk Southern Corp., as of June 30.

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