The Register-MailPosted Nov 05, 2009 @ 10:31 AM
Most reaction to the sale of the BNSF Railway to Warren Buffett’s investment firm Berkshire Hathaway has been positive. An active Galesburg employee of the railroad said Wednesday he’s optimistic, but many employees are waiting to see what happens.
The employee, who requested anonymity because he was not authorized by the company to comment on the sale, based his optimism on Buffett’s track record.
“I think it’s probably going to be a real good thing,” the employee said, “because I’ve done some research on Warren Buffett in the past and watched some of the things he’s done. The fact he went in and offered (BN CEO) Matt Rose the proper amount of money for the company ... then Matt Rose saying it took the board 15 minutes to approve the sale, that told me Warren Buffett was ready to buy the company.”
The Burlington Northern and the Santa Fe merged in 1996. According to The Associated Press, Berkshire’s biggest acquisition before BNSF was the $16 billion stock purchase of reinsurance giant General Re announced in 1998. Berkshire Hathaway paid $100 a share for BNSF, or 31 percent more than what the railroad’s stock closed on Monday. The purchase price was $34 billion, but the total deal is $44 billion, because Berkshire is assuming $10 billion in BNSF debt.
Analysts who follow Berkshire say the BNSF deal will reshape the company because of the railroad’s size. Justin Fuller, who works with Midway Capital Research & Management in Chicago and writes about Berkshire online at www.buffettologist.com, said this is the kind of elephant deal that Buffett seems to be able to find once every five or six years.
Buffett has said he realized a few years late that railroads had become an appealing investment because they are healthier today than in past years. Berkshire is buying BNSF at a time when railroad profits are down because of the recession. But as diesel prices rise, shipping by rail instead of truck will only become more attractive.
“It’s a very effective way of moving goods. I basically believe this country will prosper and you’ll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit,” Buffett told CNBC Tuesday.
Morningstar analyst Bill Bergman said he thinks Berkshire’s acquisition of BNSF is consistent with Buffett’s long-term philosophy, and the timing is good for the investment.
Bergman said he thinks BNSF will be a good fit with Berkshire’s other operating companies, and that could be important even with Berkshire’s hands-off management style.
“It’s not just energy prices,” Bergman said. “I think the fit with the operating subsidiaries is important.”
The BNSF employee agreed with the experts.
“In general, I think it’s a great thing,” he said. “I just don’t see anything negative about this. I don’t think he’s a micro-manager.”
Asked about the reaction from other local BNSF employees, the man said, “Everyone is kind of curious. I’m not saying they think it’s a negative thing or they think it’s a positive thing. I think they’re taking a wait-and-see attitude and see where this leads. A lot of guys don’t know a lot about Warren Buffett.”
Berkshire Hathaway owns companies in businesses as diverse as clothing to car insurance to food, including Fruit of the Loom, Geico and Dairy Queen.
BNSF had $18 billion in revenue in 2008, with a profits of $2.1 billion. The railroad has a 49 percent market share among railroads competing in the western United States.
About 1,115 people are employed by the BNSF in Galesburg, which is home to the railroad’s second largest classification yard.
Most reaction to the sale of the BNSF Railway to Warren Buffett’s investment firm Berkshire Hathaway has been positive. An active Galesburg employee of the railroad said Wednesday he’s optimistic, but many employees are waiting to see what happens.
The employee, who requested anonymity because he was not authorized by the company to comment on the sale, based his optimism on Buffett’s track record.
“I think it’s probably going to be a real good thing,” the employee said, “because I’ve done some research on Warren Buffett in the past and watched some of the things he’s done. The fact he went in and offered (BN CEO) Matt Rose the proper amount of money for the company ... then Matt Rose saying it took the board 15 minutes to approve the sale, that told me Warren Buffett was ready to buy the company.”
The Burlington Northern and the Santa Fe merged in 1996. According to The Associated Press, Berkshire’s biggest acquisition before BNSF was the $16 billion stock purchase of reinsurance giant General Re announced in 1998. Berkshire Hathaway paid $100 a share for BNSF, or 31 percent more than what the railroad’s stock closed on Monday. The purchase price was $34 billion, but the total deal is $44 billion, because Berkshire is assuming $10 billion in BNSF debt.
Analysts who follow Berkshire say the BNSF deal will reshape the company because of the railroad’s size. Justin Fuller, who works with Midway Capital Research & Management in Chicago and writes about Berkshire online at www.buffettologist.com, said this is the kind of elephant deal that Buffett seems to be able to find once every five or six years.
Buffett has said he realized a few years late that railroads had become an appealing investment because they are healthier today than in past years. Berkshire is buying BNSF at a time when railroad profits are down because of the recession. But as diesel prices rise, shipping by rail instead of truck will only become more attractive.
“It’s a very effective way of moving goods. I basically believe this country will prosper and you’ll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit,” Buffett told CNBC Tuesday.
Morningstar analyst Bill Bergman said he thinks Berkshire’s acquisition of BNSF is consistent with Buffett’s long-term philosophy, and the timing is good for the investment.
Bergman said he thinks BNSF will be a good fit with Berkshire’s other operating companies, and that could be important even with Berkshire’s hands-off management style.
“It’s not just energy prices,” Bergman said. “I think the fit with the operating subsidiaries is important.”
The BNSF employee agreed with the experts.
“In general, I think it’s a great thing,” he said. “I just don’t see anything negative about this. I don’t think he’s a micro-manager.”
Asked about the reaction from other local BNSF employees, the man said, “Everyone is kind of curious. I’m not saying they think it’s a negative thing or they think it’s a positive thing. I think they’re taking a wait-and-see attitude and see where this leads. A lot of guys don’t know a lot about Warren Buffett.”
Berkshire Hathaway owns companies in businesses as diverse as clothing to car insurance to food, including Fruit of the Loom, Geico and Dairy Queen.
BNSF had $18 billion in revenue in 2008, with a profits of $2.1 billion. The railroad has a 49 percent market share among railroads competing in the western United States.
About 1,115 people are employed by the BNSF in Galesburg, which is home to the railroad’s second largest classification yard.
