Berkshire to buy BNSF

[Gilbert B Norman]

"Warren Buffett is buying the Burlington Northern"; just ask Brian Williams.

http://www.msnbc.msn.com/id/3032619/#33610488

[joshuahouse]

Most of the news stories I saw today didn't manage to use the full Burlington Northern Santa Fe name beyond the first paragraph.

[trainwayne1]

Perhaps one of the members on here with a working knowledge of government regulations can tell us if/how much of a finacial interest a railroad may have in another railroad? The Lackawanna, before merging with the Erie, had a sizeable investment in the Nickle Plate, since it was one of it's biggest interchange partners, and the PRR had a big chunk of the LV in pre-PC days. Have the laws changed?

[NE2]

I'm ashamed to ask this since I have my MBA. But how can a company buy 100% of the stock of another? What if a shareholder didn't want to sell? I presume there's a process where they can be forced to sell?

I'm glad I don't work for the company. The more I've learned about the Warren Buffet, the less I'm impressed. But I guess this isn't the time or place to go into that.

Hope it works out the best for BNSF's employees and the industry as a whole.

From the FAQ at http://www.bnsf.com/investors/presentat ... ecial.html shareholders either receive cash or Berkshire Hathaway stock. The same thing happens when two companies merge, except there's probably not usually a cash option.

[NE2]

Perhaps one of the members on here with a working knowledge of government regulations can tell us if/how much of a finacial interest a railroad may have in another railroad? The Lackawanna, before merging with the Erie, had a sizeable investment in the Nickle Plate, since it was one of it's biggest interchange partners, and the PRR had a big chunk of the LV in pre-PC days. Have the laws changed?

I believe more than 50% - in other words true control - requires ICC/STB approval. This only applies when more than one railroad is involved; in other words, this transaction doesn't require STB approval, but if Berkshire Hathaway were to then buy control of NS the STB would get involved. Similarly, if BNSF were to buy control of NS prior to this transaction, that would require approval but the Berkshire Hathaway purchase would not, since no relationships between railroads would change - BNSF would control NS before and after.
In reality, when one railroad acquires another, the one company usually buys control of the other but places the shares in a voting trust until the acquisition is approved. In the 1980s, the parents of Santa Fe and Southern Pacific merged to form the Santa Fe Southern Pacific Corporation, and the shares of SP were placed in such a trust. When the ICC denied the merger, SFSP sold SP to Anschutz (and the ICC approved common control of the Rio Grande and SP). In this specific case, Berkshire Hathaway will create a new subsidiary and merge BNSF into it, but not actually control the subsidiary until all regulatory hurdles are jumped.

[taoyue]

Most of the news stories I saw today didn't manage to use the full Burlington Northern Santa Fe name beyond the first paragraph.

"Burlington Northern" is an abbreviated name for Burlington Northern Santa Fe. In the same way that "Santa Fe" was an abbreviated name for Atchison, Topeka, and Santa Fe, back when the ATSF existed.

Around Seattle, the press would usually call BNSF "Burlington Northern," even after the merger. Granted, it was a former BN territory, but it surely helped that Burlington Northern formed the first half of the name.[code][/code]

[Gilbert B Norman]

You have a point, Mr. Taoyue, in that Burlington Northern was the acquiring company; in short, the Santa Fe was "taken over'.

The current BNSF trading symbol BNI was that assigned to Burlington Northern.

[Ridgefielder]

Most of the news stories I saw today didn't manage to use the full Burlington Northern Santa Fe name beyond the first paragraph.

I've done quite a lot of business writing and can say it's more or less the convention to only use the full name of a company once in the first sentence, then use a shorter form or ticker symbol from then on-- International Business Machines first, then IBM, for instance, or Ford Motor Company then Ford.

FWIW back when most railroads had long official names it was more the rule than the exception to use a shorter form of the name in regular usage- Milwaukee Road instead of Chicago, Milwaukee, St. Paul & Pacific; New Haven instead of New York, New Haven & Hartford; Soo Line instead of Minneapolis, St. Paul & Sault Ste Marie; etc.

[byte]

I noticed on one of the news networks' presentation on the takeover that not only were they using "Burlington Northern" as the name of the railroad in its entirety, but they were also using the old BN logo in their digital graphics (not the swoosh, or the round one that came before it). Seems as though whoever assembled the presentation did a Google image search for "burlington northern logo" and simply stuck the first result in the finished product.

[Ridgefielder]

I've noticed that too watching CNBC (we have it on monitors in my office)-- they always seem to use the old BN logo. Would've thought that BNSF's corporate communications department would have complained to them at some point.

[atsf sp]

I'm ashamed to ask this since I have my MBA. But how can a company buy 100% of the stock of another? What if a shareholder didn't want to sell? I presume there's a process where they can be forced to sell?

They would want to sell. The investors will get a hundred dollar share in Berkshire Hathaway for each BNI share they own. Or they will be compensated in cash. The deal is virtually through, but the investors still have to vote. If they do not vote, their share will be void nd sold to Buffet. But it is forseen that there will be no opposition. It shows the reemergence of the railroads if Buffet plays now such a major role. Before this buyout, he owned slightly over 20% of BNI stock.
It's good to see that Matt Rose's staff along with himself will continue to head the BNSF.

[Gilbert B Norman]

Warren's philosophy proven by many acquisitions is that one of the assets he is buying is the management team. He has clearly established he is a passive investor. This is unlike outfits such as Cerberus Capital that are sure they have "better ideas' and replace managements of their target acquisitions - case in point Chrysler, and with the inevitable results.

A London based hedge fund, TCI - The Children's Investments (wow, don't that sound altruistic) holds a large position in CSX. They are known for being "activist's' and could well start dictating to CSX management how to run the railroad.

Finally, we must remember "it ain't a done deal"; there could well be a hostile takeover tender offer from some hedge fund or another individual investor. If such be the case, BNSF investors had best "hold on for the wild ride".

disclaimer: author holds position in BNI

[mtuandrew]

disclaimer: author holds position in BNI

...though not for long, if Mr. Buffett has his way.

[neroden]

I would imagine if BH has an interest in NS, Buffett will have to divest it when they acquire BNSF.

Probably not, since it's not a direct competitor in any market (well, Memphis-Birmingham, maybe), and Buffett doesn't have an interest sufficient to plausibly encourage NS to avoid exchanging traffic with BNSF's competitors.

On the other hand, I would expect him to have to divest his UP interest.

[neroden]

I'm ashamed to ask this since I have my MBA. But how can a company buy 100% of the stock of another?

Usually it's called a "tender offer".

What if a shareholder didn't want to sell? I presume there's a process where they can be forced to sell?

Yes. If sufficient of the company's shareholders vote to sell, they can force the minority to sell out. In this case it appears that shareholders representing 2/3 of the shares of BNSF not held by Berkshire have to vote in favor of the merger, in order to force the rest to sell.