Berkshire Hathaway already owned 22.6% and will buy the 77.4% of the railroad it doesn’t already own for $100 a share in cash and stock, this includes $10 bn in outstanding debt. That is a 24% premiumn to the railroad’s closing price yesterday of $76.07. They will be borrowing $8 billion to finance the deal.
Warren Buffett said “It’s an all-in wager on the economic future of the United States”.
Berkshire Hathaway has been slowly accumulating a stake in the railroad over two years as Buffett takes a gamble on a large acquisition to deploy Berkshire Hathaway's s cash hoard. The Oracle of Omaha believes that trains will become more competitive as fuel prices rise.
“As oil prices go up, higher diesel fuel raises costs for rails, but it raises costs for its competitors, truckers, roughly by a factor of four. There could be a lot more business there than there was in the past.” Buffett told shareholders back in 2007.
“Our country’s future prosperity depends on its having an efficient and well-maintained rail system.”
Matthew K. Rose, Burlington Northern Santa Fe chairman, president and CEO said “We are thrilled to have the opportunity to become a part of the Berkshire Hathaway family,” said “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. This transaction offers compelling value to our shareholders and is in the best interests of all of our constituents including our customers and employees.”
Burlington Northern has 6700 locomotives and 32,000 miles of track, most of which is west of the Mississippi. The company carries coal, grain, and "intermodal containers", which can be carried via rail, road and sea.
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