Buffett rail deal likely to be biggest of his life


WARREN Buffett yesterday struck the biggest deal of his life with the $26 billion purchase of Burlington Northern Santa Fe (BNSF), one of the largest US railroad operators, in what the billionaire investor called an “all-in wager” on America’s economic future.

The cash-and-shares deal by Mr Buffett’s Berkshire Hathaway,which already has a 22.6 per cent stake in BNSF, caps a long search by the legendary investor for an “elephant” deal to deploy his vast cash pile.

The takeover deepens Mr Buffett’s exposure to the US-focused old economy sectors that have long been the backbone of his empire alongside financial services, and underlines his confidence in a rebound in domestic growth.

“America’s best years lie ahead, no question about it,” Mr Buffett told CNBC after the deal, which values BNSF at $44 billion, including $10 billion of debt and the value of the stake Berkshire had accumulated since 2007.

After a few overseas purchases prior to the crisis, Mr Buffett refocused on the US during the turmoil, buying into then-ailing corporate icons like General Electric and Goldman Sachs.

Doug Kass, general partner at the hedge fund Seabreeze Partners Management and a former Berkshire shareholder, said the BNSF takeover could be a defining moment for the 79-year-old investor. “Considering the size, this could be Mr Buffett’s coup de grace on the deal world. And it’s going to take a while to absorb it. I think it’s his last meaningful deal.”

The takeover of BNSF, a railroad operator with more than $18 billion in top-line revenues whose origins date to 1849, dwarfs previous deals by Berkshire, the textile group that Mr Buffett turned into an insurance-to-confectionery conglomerate.

Until yesterday Mr Buffett’s biggest deal was the $18 billion acquisition of General Re, a reinsurance group, in 1998. – (Copyright The Financial Times Limited 2009)