The Global Demographic Tailwind

[DewDiligence]

Berkshire Hathaway to Acquire Burlington Northern Santa Fe Corporation for $100 Per Share in Cash and Stock

[BNI and UNP are in the portfolio of the foundation I advise (see #msg-39888049 for the rationale), but I never thought either was a likely buyout candidate. Indeed, an acquisition by another transportation company would have been all but impossible for antitrust reasons. Buffett aside, the only way BNI could have been bought was through a 1980’s-style LBO and you don’t see many of those kinds of deals these days.

BNI closed Tuesday at $97, which is only a 3% discount to the $100 buyout price and implies that investors think the deal is rock solid. BNI shareholders in tax-exempt accounts might as well sell now and take the $97 insofar as the deal closing is several months away. However, shareholders in taxable accounts may do better by accepting Berkshire shares in lieu of cash, which will defer capital-gains taxes.]

http://online.wsj.com/article/SB20001424052748703294004574511602782800232.html

›7:30 am EST, NOVEMBER 3, 2009

BNSF will continue to operate from its Fort Worth, TX headquarters and will become a wholly owned subsidiary of Berkshire Hathaway

FORT WORTH, Texas & OMAHA, Neb. -- November 03, 2009-- The boards of directors of Berkshire Hathaway Inc. (NYSE: BRK.A; BRK.B) and Burlington Northern Santa Fe Corporation (BNSF; NYSE: BNI) today announced a definitive agreement for Berkshire Hathaway to acquire for $100 per share in cash and stock the remaining 77.4% of outstanding BNI shares not currently owned to increase its holdings to 100%. Based on the number of outstanding BNI shares (including shares currently owned by Berkshire) on Nov. 2, 2009, the transaction is valued at approximately $44 billion, including $10 billion of outstanding BNSF debt, making it the largest acquisition in Berkshire Hathaway history.

"Our country's future prosperity depends on its having an efficient and well-maintained rail system," said Warren E. Buffett, Berkshire Hathaway chairman and chief executive officer. "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," said Mr. Buffett. "I love these bets."

"We are thrilled to have the opportunity to become a part of the Berkshire Hathaway family," said Matthew K. Rose, Burlington Northern Santa Fe chairman, president and chief executive officer. "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. This transaction offers compelling value to our shareholders and is in the best interests of all of our constituents including our customers and employees."

Terms of the Transaction

The definitive agreement provides that each share of BNI common stock will at the election of the shareholder be converted into the right to receive either (i) a cash payment of $100.00 or (ii) a variable number of shares of Berkshire Hathaway Class A or Class B common stock, subject to proration if the elections do not equal approximately 60% in cash and 40% in stock. The stock component of the consideration is subject to a "collar" whereby the value of each Berkshire Hathaway share received is fixed at $100.00 if the price of Berkshire Hathaway Class A stock at closing is between approximately $80,000.00 and approximately $125,000.00 per share. If the value of Berkshire Hathaway Class A stock is outside of this collar range at closing, then the number of shares received of Berkshire Hathaway Class A stock will be fixed at either 0.001253489 per BNI share for values below the collar range, or 0.000802233 per BNI share for values above the collar range. The shareholder may receive Class A or, in lieu of fractional Class A shares, equivalent economic value of Class B Berkshire Hathaway shares, subject to certain limitations as described in the definitive agreement.

The transaction requires approval by holders of two-thirds of BNI's outstanding shares (other than shares held by Berkshire Hathaway), and customary closing conditions, including Department of Justice review. Closing is expected to occur during the first quarter of 2010.

BNSF Railway Company will continue to focus on providing outstanding service to its customers from its Fort Worth, TX headquarters. Included in the transaction are all assets and subsidiaries of BNSF.

Goldman, Sachs & Co. and Evercore Partners, Inc. acted as financial advisors to BNSF and the company's legal counsel is Cravath Swaine & Moore LLP. Berkshire Hathaway's transaction counsel is Munger, Tolles & Olson LLP.

At 8:30 a.m. eastern, BNSF executive management will conduct a briefing for investors and other interested parties. The briefing will be Web cast and available via the investor relations section of www.bnsf.com. The call in number is [phone] and the replay number is (USA) [phone], (International) [phone], and access code 122409. The briefing will not include a question and answer session.

BNSF is a holding company and through its principal operating subsidiary BNSF Railway Company, BNSF owns and manages one of the largest railroad systems in North America.

Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities including property and casualty insurance and reinsurance, utilities and energy, manufacturing, retailing and services.‹