Warren Buffett, a long-time investor in railroad stocks, announced a move Tuesday to acquire all of Burlington Northern Santa Fe Corp.
Buffett's Berkshire Hathaway currently owns about 22 percent of BNSF's stock. The new deal, Buffett's largest acquisition, calls for it to acquire for $100 per share in cash and stock the remaining 77.4 percent of outstanding BNSF shares not currently owned to increase its holdings to 100 percent.
Based on the number of outstanding shares, which would include shares owned by Berkshire on Nov. 2, 2009, the transaction is valued at approximately $44 billion, including $10 billion of outstanding BNSF debt.
"Our country's future prosperity depends on it having an efficient and well-maintained rail system," said Buffett, Berkshire Hathaway's chairman and chief executive officer. "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."
Buffett stressed that the proposed acquisition wasn't just about buying a single railroad. "It's an all-in wager on the economic future of the United States," he said. "I love these bets."
The proposed deal would provide a 30-percent premium to the recent BNSF stock price and allow shareholders to participate in future growth through Berkshire Hathaway shares. "We are thrilled to have the opportunity to become a part of the Berkshire Hathaway family," said Matt Rose, Burlington Northern Santa Fe chairman, president and chief executive officer. "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."
The transaction must be approved by two-thirds of BNSF's outstanding shares, and is subject to customary closing conditions, including Department of Justice review. The deal is expected to close during the first quarter of 2010.
Berkshire Hathaway is a holding company owning subsidiaries in a number of diverse businesses, including property and casualty insurance and reinsurance, utilities and energy, manufacturing and retailing.
Burlington Northern Santa Fe Corp.'s subsidiary BNSF Railway operates one of the largest North American rail networks, with about 32,000 route miles in 28 states and two Canadian provinces. BNSF Railway is a large hauler of intermodal traffic, grain and coal.