Berkshire Hathaway All Aboard For $34B Burlington Buy

By Megan Stride

Law360, New York (November 03, 2009) -- Berkshire Hathaway Inc. announced Tuesday it will pay $34 billion in cash and stock to become the sole owner of railway operator Burlington Northern Santa Fe Corp., the biggest acquisition in the conglomerate's history.

Berkshire Hathaway, a holding company that functions as Warren Buffett's massive investment vehicle, will be picking up the remaining 77.4 percent of the railway company that it does not already own in a transaction slated to amount to 60 percent cash and 40 percent stock, it said.

The company will offer shareholders a choice of either $100 cash per BNSF share or the equivalent in Berkshire Hathaway common stock, according to the announcement.

Berkshire Hathaway will also acquire $10 billion in BNSF debt, it said.

Buffett talked about the acquisition with his typical enthusiasm, saying it represented a vote of confidence in both the importance of the railroad industry and in the future of the American economy at large.

“Our country’s future prosperity depends on its having an efficient and well-maintained rail system,” Buffett said in a statement Tuesday. “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.”

“Most important of all, however, it’s an all-in wager on the economic future of the United States,” Buffett added. “I love these bets.”

Despite the enormity of the transaction, the process moved quickly.

Negotiations began Oct. 27, and the deal was approved and signed in under a week, according to Munger Tolles & Olson LLP, which represents Berkshire Hathaway in the acquisition.

The deal is still subject to regulatory review and requires two-thirds approval by holders of BNSF's outstanding shares. Berkshire Hathaway said it expected to close on the deal in the first quarter of 2010.

“We are thrilled to have the opportunity to become a part of the Berkshire Hathaway family,” said Matthew K. Rose, BNSF chairman, president and CEO.

“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,” Rose said. “This transaction offers compelling value to our shareholders and is in the best interests of all of our constituents including our customers and employees.”

BNSF is a holding company in its own right, operating one of the largest railway systems in the country through its subsidiary, BNSF Railway Co. The Fort Worth, Texas-based company's rails primarily transport coal and grain in the middle and western regions of the United States.

Cravath Swaine & Moore LLP is representing BNSF in the transaction, led by partners Scott A. Barshay, George E. Zobitz, Damien R. Zoubek, Eric W. Hilfers, Elizabeth L. Grayer and Michael L. Schler.

Goldman Sachs & Co. and Evercore Partners Inc. are acting as BNSF's financial advisers. Both advisers are represented by Sullivan & Cromwell LLP, led by partner Stephen Kotran for Goldman Sachs and partner George Sampas for Evercore.

Munger Tolles & Olson LLP is representing Berkshire Hathaway in the transaction, led by partners Robert E. Denham, Mary Ann Todd, Brett J. Rodda, Stephen D. Rose and David Goldman.