Warren Buffett’s Riding the “Atchison, Topeka and Santa Fe”

Omaha billionaire Warren Buffett’s purchase of the Burlington Northern Santa Fe Railroad (BNSF) is a $34 billion bet on the future of the nation’s economy.  BNSF’s acquisition by Berkshire Hathaway, Inc. is significant because it is the country’s second largest railroad and the primary hauler of food and coal, which makes it a barometer of the nation’s economic health.  Analysts believe that Buffett is staking his claim in an industry that is expected to grow as the economy stabilizes.  If approved by two-thirds of shareholders and antitrust regulators, the transaction will be Berkshire Hathaway’s largest-ever acquisition.  Berkshire already owns large stakes in the Union Pacific and Norfolk Southern railroads.

Buffett currently owns 22 percent of BNSF and will pay $100 a share in cash and stock for the remainder of the company.  “Berkshire’s $34 billion investment in BNSF is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry,” according to Buffett’s statement.  “Most important of all, however, it’s an all-in wager on the economic future of the United States.  I love these bets.”

According to Art Hatfield, an analyst with the investment firm Morgan Keegan, “Buffett is buying at the trough – things aren’t going to get much worse.  He’s getting in at a good time.”  Hatfield believes that BNSF has been more progressive than its competitors in developing new technologies to enhance profitability.  Railroads have cut costs during the recession by slashing jobs, idling railcars, improving train speeds and other efforts to make their operations more efficient.