Wednesday, November 4, 2009

Warren Bets The Farm On US Rail Freight Purchase

Buffett Bids for Burlington Northern and Sees the Future in Rail
Shipping News Feature

US – Never since the time when the Iron Horse crossed the Western Plains has anyone invested what billionaire Warren Buffett has just put on the line in a bid to take over Burlington Northern Santa Fe (BNSF), the second largest rail freight company in the world. In what he describes as, “An all-in wager on the economic future of the United States.” Mr Buffett launched his $34 billion bid, “ I love these bets,” he then said.

Up to last night Mr Buffett’s bidding vehicle, his Berkshire Hathaway group, owned just over 30% of BNSF but he had put $100 a share in cash and stock down to buy the balance outright from other investors. Mr Buffett's view is simple; in a push to a cleaner, cheaper freight environment the rail freight market in the US, considered woefully underdeveloped by many overseas analysts, must be the way forward.

The “Sage of the North” as he is known colloquially, says he is making "an all-in wager on the economic future of the United States" and believes that for the country to prosper it must have an efficient rail system but that for the rail system to prosper the US itself had to also do well, and in his view that was a gamble worth taking.

It appears the management team will remain intact with Mr Buffett overseeing his investment personally and ensuring things proceeded in the direction he foresaw, he will be taking over a corporation forged in the tradition of the Western pioneers in 1839 by Texan investors and, through acquisitions now runs over 220,000 freight wagons on over 30,000 miles of rail tracks.