Berkshire to buy BNSF

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Gilbert B Norman
Posts: 14049
Joined: Fri Mar 12, 2004 6:52 am
Location: Clarendon Hills, IL (BNSF Chicago Sub; MP 18.71)

Special Meeting - Feb 11

Post by Gilbert B Norman » Sun Jan 10, 2010 8:13 am

I received my Notice of the February 11 special meeting at which the matter to merge BNSF with Berkshire Hathaway will be voted upon. This material is not yet available at the web, so I hope the following "hunt and peck" exercise will prove beneficial to anyone interested to know the details of the shareholder exchange;
(typed)......At the special meeting, you will be asked to approve the Agreement and Plan of Merger, dates as of November 2, 2009 (the merger agreement), by and among Berkshire Hathaway Inc (Berkshire), R Acquisition company, LLC, an indirect wholly owned subsidiary of Berkshire ("Merger Sub") and BNSF pursuant to which BNSF will be merged with and into Merger Sub and Merger Sub will continue as the surviving entity. Following the merger, Merger Sub will change its name to "Burlington Northern Santa Fe, LLC" and will remain an indirect wholly owned subsidiary of Berkshire.

If the merger is completed, each of your shares of BNSF common stock will be converted into the right to receive, at your election....either (i) $100.00 in cash, without interest, or (ii) a portion of a share of Berkshire Class A common stock equal to the exchange ratio, which is calculated by dividing $100.00 by the average of the daily volume-weighted average trading prices per share of Berkshire Class A common stock over the ten day trading period ending on the second full trading day prior to the completion of the merger (the "Class A average trading value") provided however, that if Class A average trading value is above $124,652.09 or below $79,777.34 (author's note: BRK.A @ close 1-8-10: $100,300.00), then the exchange ratio will be fixed at 0.000802233 or 0.001253489, as the case may be. Fractional shares of Berkshire Class A common stock will not be issued in the merger (author's note; guarantee you I will not be seeing any of such), Instead, shares of Berkshire Class B common stock (author's note: BRK.B @ close 1-8-10: $3,322.00) will be issued in lieu of any fractional shares of Berkshire Class A common stock and cash will be paid in lieu of any fractional shares of Berkshire Class B common stock. To facilitate the merger and related transactions, Berkshire is seeking an approval to effect a 50-for-1 stock split with respect to its Class B common stock (author's note: BRK.B @ close 1-8-10 after split would be $66.44). Shares of Berkshire Class A and Class B common stock are listed on the New York Stock Exchange under the stock symbols "BRK.A" and "BRK.B"respectively.
disclaimer: author holds position in BNI and will participate in this exercise of "corporate democracy". I'll share with the forum I voted in favor of the merger.

Gilbert B Norman
Posts: 14049
Joined: Fri Mar 12, 2004 6:52 am
Location: Clarendon Hills, IL (BNSF Chicago Sub; MP 18.71)

Re: Berkshire to buy BNSF

Post by Gilbert B Norman » Tue Jan 19, 2010 3:02 pm

The following brochure showed up in the mail today:

http://www.bnsf.com/investors/berkshire ... ochure.pdf

Considering that there is not any kind of "hostile" counter-offer on the table, I'm astounded of any appearance that the merger is anything other than open and shut. You'd think this is Coakley v. Brown (Mass Senate race).

Gilbert B Norman
Posts: 14049
Joined: Fri Mar 12, 2004 6:52 am
Location: Clarendon Hills, IL (BNSF Chicago Sub; MP 18.71)

Re: Berkshire to buy BNSF

Post by Gilbert B Norman » Thu Feb 04, 2010 2:31 pm

Oh,Oh

http://online.wsj.com/article/SB1000142 ... 53466.html

Brief passage:

  • Standard & Poor's Ratings Services stripped its top triple-A rating from Berkshire Hathaway Inc. and various units, citing the conglomerate's pending $26 billion acquisition of the Burlington Northern Santa Fe Corp.

    S&P lowered its ratings one notch to double-A-plus. The outlook is stable.

    S&P was the last of the three major U.S. ratings firms to have billionaire investor Warren Buffett's holding company at triple-A. Moody's Investors Service and Fitch Ratings took that gold standard away last year amid the financial crisis.

    S&P changed its ratings outlook to negative last March and put them on watch for downgrade in November after the Burlington deal was announced.

    Earlier Thursday, Berkshire said it is selling $8 billion of debt to help finance its purchase of the remaining 77% of Burlington it doesn't already own. S&P said the takeover has weakened the capital adequacy of the whole company and its insurance units "to levels no longer consistent with a AAA rating."
While Warren has made a few missteps in his career, USAir coming to mind, and he has failed to grasp trends, namely the 1999 "technobubble", which, and pardon my Shakespearean parody, "when taken at its crest can lead to fortune' (be sure an "exit strategy" is in place), he is hands down one of the most successful investors of all time.

I like to think he knows what he is doing with BNSF, and that in time S&P and the other credit rating agencies, will get on board.

neroden
Posts: 1175
Joined: Sun Nov 12, 2006 12:37 am
Location: Ithaca, NY

Re: Berkshire to buy BNSF

Post by neroden » Sat Feb 06, 2010 9:02 pm

Gilbert B Norman wrote:Considering that there is not any kind of "hostile" counter-offer on the table, I'm astounded of any appearance that the merger is anything other than open and shut.
It's due to the fact that it requires 2/3 of the non-Berkshire holders of BNSF to vote for it.

Sheer apathy on the part of shareholders could kill the merger.

neroden
Posts: 1175
Joined: Sun Nov 12, 2006 12:37 am
Location: Ithaca, NY

Re: Berkshire to buy BNSF

Post by neroden » Sat Feb 06, 2010 9:05 pm

Gilbert B Norman wrote:I like to think he knows what he is doing with BNSF, and that in time S&P and the other credit rating agencies, will get on board.
The credit rating agencies have rather less credibility with investors than Buffett does at this point, after rating junk mortgage-backed bonds AAA!

You want to know what the market thinks of creditworthiness, look at the interest rates on bonds. I will bet Berkshire's bonds will be at very low rates.

Gilbert B Norman
Posts: 14049
Joined: Fri Mar 12, 2004 6:52 am
Location: Clarendon Hills, IL (BNSF Chicago Sub; MP 18.71)

Re: Berkshire to buy BNSF

Post by Gilbert B Norman » Sun Feb 07, 2010 9:04 am

Point noted, Mr. Neroden; however let us note that the Market considers the merger to be a done deal. BNI closed Feb 5 @ 99.23 which for all intent and purpose represents a "discounted' 100.

Although this was likely the only proxy I' ve ever bothered to vote, I will be taking cash for my shares. While I have nothing but respect for the methods (avoid the fads, concentrate on businesses that have a business and not just a business plan) and success of Warren Buffet's investing, I cannot see paying TWO people, i.e. Warren and my Investment Advisors, to do ONE job. It is also why not too much of my portfolio is comprised of mutual funds; again paying two for one.

Gilbert B Norman
Posts: 14049
Joined: Fri Mar 12, 2004 6:52 am
Location: Clarendon Hills, IL (BNSF Chicago Sub; MP 18.71)

Done Deal

Post by Gilbert B Norman » Sat Feb 13, 2010 10:04 am

It's a done deal;

Brief passage:

  • NEW YORK -- Burlington Northern Santa Fe Corp. shareholders have approved the railroad's sale to Warren Buffett's Berkshire Hathaway, paving the way for the Oracle of Omaha to complete his biggest acquisition yet.

    The $26.3 billion purchase of the nation's second-largest railroad is expected to officially close on Friday.

    Burlington Northern CEO Matt Rose said 70 percent of shares cast that Berkshire didn't already own voted in favor of the deal. The acquisition needed two-thirds approval to pass.

    "Tomorrow begins the first century of ownership of BNSF by Berkshire Hathaway," Buffett said in a statement. "I'm looking forward to every day of it as our railroad does its part to ensure the future prosperity of the country."

    Berkshire Hathaway, based in Omaha, Neb., agreed last fall to pay $100 per share in cash and stock for the 77.4 percent of BNSF shares that it didn't already own.

Associated Press courtesy of Washington Post

Image

Somehow I think a few of us around here have known a railfan (or two) who would have closed that locomotive's door before playing shutterbug. Wisely, the AP photographer respected he was on railroad property and did not do so.

Finally, I must acknowledge a weakness on my part. While I like to think that in the thirty plus years I have been out there investing to know that a cardinal rule is never get emotionally attached to any investment you make (worst culprit is company stock added to an employee's 401(k) plan as a match), I felt a 'twinge' yesterday when taking my walk and I observed a WB 'double stack" and the reality that such (even if just an amoeba of such) is no longer mine.

I'm perfectly willing to share with the Forum that "I did OK" with my BNI position. I took such Mar 07-07 @ 78.63 and will sell Apr 01-10 @ 100. Such was held 1121 days resulting in a gain of 21.37 p/s or 27.17%. This annualizes to a gain of 8.85% which I'd dare say is a mite bit better than the S&P did over same period.

I've had a great ride; Warren, I know you will have same.

Gilbert B Norman
Posts: 14049
Joined: Fri Mar 12, 2004 6:52 am
Location: Clarendon Hills, IL (BNSF Chicago Sub; MP 18.71)

Closed

Post by Gilbert B Norman » Wed Feb 17, 2010 8:04 am

This morning, I received on line notification from my brokerage house that my BNI position has been redeemed and the proceeds credited to my account. In short, Warren has his 1:1 Lionel and is about to plug in his ZW transformer, don his Engineer's cap, and high-ball.

the final disclaimer; author no longer holds position in BNI, which has now been removed from the S&P 500 (replaced by BRK.B) and delisted on the NYSE.

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