Tulsa World: Buffet agrees to sell railroad stakes before acquiring BNSF

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Buffet agrees to sell railroad stakes before acquiring BNSF

A Burlington Northern Santa Fe train moves through Cajon Pass near San Bernardino, Calif. Warren Buffett's Berkshire Hathaway Inc. has agreed to sell its stakes in the Union Pacific and Norfolk Southern railroads before it completes its purchase of BNSF for $26 billion. Jonathan Alcorn / Bloomberg

By JOSH FUNK Associated Press
Published: 11/10/2009 2:25 AM
Last Modified: 11/10/2009 8:37 AM

OMAHA, Neb. — Warren Buffett's company will sell its stakes in the Union Pacific and Norfolk Southern railroads before it completes its $26.3 billion acquisition of the Burlington Northern Santa Fe Corp. railroad.

Berkshire Hathaway Inc.'s plan to sell those stocks was revealed in documents filed with the Securities and Exchange Commission on Monday.

According to a transcript of a conference call, BNSF's CEO, Matt Rose, told his employees that Berkshire plans to sell its 9.6 million shares of Union Pacific Corp. and 1.9 million shares of Norfolk Southern Corp.

Berkshire's holdings represented 2 percent of Union Pacific and less than 1 percent of Norfolk Southern.

Berkshire officials did not immediately respond to questions Monday. They do not typically comment on the company's holdings.

Berkshire last provided an update on its U.S. stock holdings in August when it listed its holdings as of the end of June. A third-quarter update is expected this month.

Buffett said last week that the BNSF deal is essentially a wager on the U.S. economy because railroad profits tend to grow along with the economy.

Railroads carry raw materials and finished products for a number of industries as well as delivering coal to utilities.

Buffett has said he realized a few years late that railroads were an appealing investment. As diesel fuel 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.

Monday's disclosure confirms that Buffett has chosen to let his rail wager ride exclusively on Burlington Northern, the country's second-largest railroad.

Berkshire already owns 22.6 percent of BNSF's stock, and it announced a plan Nov. 3 to acquire the rest for $100 per share in cash and stock.

The acquisition of the Fort Worth railroad would be the biggest ever for Buffett's holding company. Berkshire's biggest previous acquisition was the $16 billion stock purchase of the reinsurance giant General Re, announced in 1998.

The deal needs approval from Burlington shareholders and antitrust regulators and is set to close early next year.

Berkshire owns roughly 70 subsidiaries, including furniture, insurance, jewelry and candy companies, restaurants, natural gas and corporate jet firms. Berkshire employs more than 240,000 people and has investments in such companies as American Express Co., Coca-Cola Co. and Wells Fargo & Co.

Union Pacific shares rose 2 cents to close at $62.38 on Monday and Norfolk Southern lost 12 cents to close at $51.95. By JOSH FUNK Associated Press

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