Berkshire set to buy Burlington Northern after shareholder OK

Burlington Northern Santa Fe Corp (NYSE:BNINews) shareholders approved the No. 2 U.S. railroad company’s takeover by Berkshire Hathaway Inc (NYSE:BRK-ANews; NYSE:BRK-BNews), clearing the way for the largest acquisition of billionaire investor Warren Buffett to be completed on Friday.

Berkshire is buying the 77.4 percent of Burlington Northern that it did not already own. The cash-and-stock transaction was valued at $26.4 billion, or $100 per share, and valued all Burlington Northern at about $34 billion.

“Tomorrow begins the first century of ownership of BNSF by Berkshire Hathaway,” Buffett, 79, said in a statement. “I’m looking forward to every day of it as our railroad does its part to ensure the future prosperity of the country.”

The roots of Fort Worth, Texas-based Burlington Northern date back to 1849.

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Of the Burlington Northern shares not owned by Berkshire, about 70 percent were voted for the merger, exceeding the needed two-thirds approval.

Berkshire said holders of 40.9 percent of the shares chose to swap them for cash, 43.4 percent chose stock, and the rest made no choice. Berkshire targeted a 60/40 cash-stock split.

Based in Omaha, Nebraska, Berkshire owns roughly 80 other businesses that sell such products as Geico car insurance, Dairy Queen ice cream and Fruit of the Loom underwear.

Last month it conducted a 50-for-1 split of its Class B shares, which traded around $3,400, to let Burlington Northern shareholders do stock swaps rather than be forced to cash out and pay taxes. Higher-priced Class A shares were not split.

The takeover has already cost Berkshire its last “triple-A” credit rating, in part because it is a big bet that could weigh on capital and eats up a good chunk of cash.

Fitch Ratings, the first major credit agency to take away its triple-A rating, downgraded Berkshire again on Wednesday.

Berkshire’s largest previous acquisition was its 1998 takeover of the reinsurer General Re.


Last month, Burlington Northern posted a 13 percent drop in quarterly profit that nonetheless topped analyst forecasts.

The takeover means the company will no longer need to report stand-alone quarterly results.

That is a relief to Chief Executive Matthew Rose, who said it can be “frustrating” having to cater in part to investors focused on the short term.

“What our team is doing today really won’t be felt in terms of capital spending for five or seven, or even 10 or 15 years and beyond,” he said on a Thursday conference call. “Warren has a great reputation for looking past the quarters.”

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Buffett is the world’s second-richest person and perhaps its most admired investor. He has sought to justify what he called paying “up to the absolute hilt” for Burlington Northern.

“If you look at the next 50 years, this country is going to grow, it’s going to have more people, it’s going to have more goods moving, and rail is the logical way for many of those goods to travel,” he told the company’s employees in December.

Berkshire will replace Burlington Northern in the Standard & Poor’s 500 (^SPXNews) index.

In late morning trading, Burlington Northern shares were up 26 cents at $100.22, Berkshire Class A shares were up $362 at $111,912, and Berkshire Class B shares were up 18 cents at $74.60.

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