Buffett ‘all-in’ for $34b railroad deal

By Samantha Bomkamp
Associated Press / November 4, 2009

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NEW YORK - The biggest name in investing is making what he calls an “all-in wager’’ on the US economy - $34 billion to own a railroad that hauls everything from corn to cars across the country.

The acquisition of Burlington Northern Santa Fe, the nation’s second-largest railroad, would be the biggest ever for Warren Buffett’s Berkshire Hathaway investment company.

It’s a natural fit for the Oracle of Omaha, a city with a special place in railroad history. It was the starting point for the westward push of the transcontinental railroad. Today, Omaha is the headquarters of Union Pacific, and Burlington Northern trains rumble through.

In a statement, Buffett voiced confidence in the railroad industry. “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 yesterday.

Berkshire Hathaway Inc. already owns a 22 percent stake in Burlington Northern and would buy up the rest under the deal, for a total value of $34 billion. It still needs approval from Burlington shareholders and antitrust regulators, both expected early next year.

Burlington Northern is the biggest hauler of corn and coal for electricity, making it an indicator of the country’s economic health. It also carries everyday items such as refrigerators, clothing, and TVs from Western ports like Los Angeles and Seattle.

Burlington Northern Santa Fe Corp. stock shot up $20.93, or 27 percent, to $97. Stock in other rail companies rose as well.

Buffett has said he realized a few years late that railroads were an appealing investment. As diesel prices rise, shipping by rail instead of truck becomes more attractive, and it would be extremely difficult for a competitor to build a new railroad.

Clarification: An Associated Press story in yesterday's Business section should have specified that Berkshire Hathaway has agreed to pay $26.3 billion in cash and stock for the 77.4 percent of Burlington Northern Santa Fe Corp. it does not now own, valuing the entire company at $34 billion.