Sanchek
11-03-2009, 04:24 PM
http://www.reuters.com/article/topNews/idUSTRE5A22A720091103
Warren Buffett's Berkshire Hathaway Inc will pay $26 billion to buy out Burlington Northern Santa Fe Corp in a bet that the nation's largest rail company is poised to benefit from a recovering U.S. economy.
The deal announced Tuesday, Buffett's biggest-ever acquisition, also represents a bet on coal and new interest in a storied but highly cyclical American industry that has tried to reinvent itself by emphasizing its ability to move goods cheaply and efficiently.
The deal was priced at a premium of 31.5 percent over BNSF's closing stock price on Monday and values the railroad at $34 billion, or 18 times estimated 2010 earnings. BNSF shares jumped 28 percent in afternoon trading; other U.S. and Canadian rail shares also rose.
"It's an all-in wager on the economic future of the United States," Buffett, who has been building up his rail holdings for several years, said in a statement. "I love these bets."
That's great to see. The wealthy investing in real industry here is what we need, instead of them shuffling money around through various financial instruments.
It would hurt in the short term, but maybe what we need is an even larger crisis of confidence in paper investments. Maybe people would seek out real, productive investments to put their money in, if there weren't this conventional wisdom that you should trust a paper pusher with all your money.
Warren Buffett's Berkshire Hathaway Inc will pay $26 billion to buy out Burlington Northern Santa Fe Corp in a bet that the nation's largest rail company is poised to benefit from a recovering U.S. economy.
The deal announced Tuesday, Buffett's biggest-ever acquisition, also represents a bet on coal and new interest in a storied but highly cyclical American industry that has tried to reinvent itself by emphasizing its ability to move goods cheaply and efficiently.
The deal was priced at a premium of 31.5 percent over BNSF's closing stock price on Monday and values the railroad at $34 billion, or 18 times estimated 2010 earnings. BNSF shares jumped 28 percent in afternoon trading; other U.S. and Canadian rail shares also rose.
"It's an all-in wager on the economic future of the United States," Buffett, who has been building up his rail holdings for several years, said in a statement. "I love these bets."
That's great to see. The wealthy investing in real industry here is what we need, instead of them shuffling money around through various financial instruments.
It would hurt in the short term, but maybe what we need is an even larger crisis of confidence in paper investments. Maybe people would seek out real, productive investments to put their money in, if there weren't this conventional wisdom that you should trust a paper pusher with all your money.