Buffett buying Burlington Northern railroad

[WriteDown]

Source: MSNBC

NEW YORK - Warren Buffett has made bets on railroads before, but now he's all in. The billionaire investor's Berkshire Hathaway Inc. on Tuesday agreed to buy Burlington Northern Santa Fe Corp., making a $34 billion bet on the future of the U.S. economy.

Burlington Northern, the nation's second-largest railroad, is the biggest hauler of food products like corn, and coal for electricity, making it an indicator of the country's economic health. The railroad also ships a large amount of consumer goods — including items imported from Asia — from big Western ports like Los Angeles and Seattle.

Analysts say Buffett is planting both feet in an industry that is poised to grow as the economy gets back on solid ground. It would be the biggest acquisition ever for Berkshire Hathaway Inc.

Berkshire Hathaway already owns about 22 percent of Burlington Northern, and will pay $100 a share in cash and stock for the rest of the company. That was 31.5 percent premium on Burlington Northern's Monday closing price. The stock shot up over 28 percent Tuesday, to $97.66 in afternoon trading.

Shareholders have the option to convert their stock for a cash payment of $100 per share or receive Berkshire Class A or Class B common stock. Up to 60 percent of the deal is cash and 40 percent is in stock...

Read more: http://www.msnbc.msn.com/id/33599744/ns/business-us_business/

---

Does it come with a conductor's hat? :)

[elleng]

1. No conductors hat,

just another full thread!

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x6914392


Last week Burlington Northern reported third-quarter profit dropped 30 percent from a year earlier. Burlington Northern made almost a third of its money in the last quarter from shipments of consumer products from the West to major hubs like St. Louis, Kansas City and Chicago.

It's next largest segment was coal, at 27 percent of revenue, followed by industrial products — like farm equipment, lumber and chemicals — at 21 percent. The agricultural products segment — 20 percent of its total revenue — includes major crops like corn, wheat and soybeans — much of that exported to China.

[Ian David]

2. I hope it DOES come with a hat!

[elleng]

3. Sure if it were THAT guy,

but no passengers on BN or SF anymore!

[defendandprotect]

4. Could we meed an ANTI-MONOPOLY GAME . . . PLEASE?????????

[elleng]

5. 'Meed?'

There is/was a railroad 'monopoly' game out some years ago; I forget its name. I played it with colleagues at the ICC, as we were 'regulating' these transactions, kind of like a busman's holiday!

Does that answer your question?

edit: Did not play it AT the ICC while working, but had a 'Rail Baron' party! Just remembered name of the game!

Here it is!

http://www.railgamefans.com/rbp/rbgame.htm

[defendandprotect]

7. Typo: "meed" should have been GET . . .

There are lots of variations of the game MONOPOLY . . .

I think we need a new board game called: DEFEATING MONOPOLY

or, as I suggested before, perhaps "Anti-Monopoly" . . .

[elleng]

8. I see!

There's been 'anti-rail-monopoly' legislation on the books for many moons, and I worked at the Interstate Commerce Commission during the time that a number of rail consolidations were presented. The ICC refused to approve consolidation between Southern Pacific and Santa Fe, surprising many.

I cannot say the same about other industries.

[dflprincess]

16. When it was introduced "Monopoly" was intended to be

an anti-monopoly game. It was suppose to show the evils of a monopoly with one winner and everyone else a loser.

[safeinOhio]

6. Looks like my 1 share of Berkshire class B

is now going to be 50 shares.

[happyslug]

9. Map of the Burlington Northern Santa Fe (BNSF)

http://www.bnsf.com/tools/reference/division_maps/
http://www.bnsf.com/
http://en.wikipedia.org/wiki/BNSF_Railway

Its main Competitor is the Union Pacific:

http://www.uprr.com/customers/shipping/tutorial/step1/access.shtml

http://en.wikipedia.org/wiki/Union_Pacific_Railroad
http://www.up.com/

[happyslug]

10. Lets don't forget the Eastern Giants:

Norfolk and Southern:

http://www.nscorp.com/nscportal/nscorp/map.html
http://www.nscorp.com/nscportal/nscorp/
http://en.wikipedia.org/wiki/Norfolk_Southern_Railway

CSX Railraod:

http://www.csx.com/share/media/media/docs/PrintableSystemMap-REF24028.pdf
http://en.wikipedia.org/wiki/File:CSX_Transportation_system_map.svg
http://www.csx.com/?fuseaction=about.main
http://en.wikipedia.org/wiki/CSX_Transportation

Last but not least the Canadian Pacific:

http://www8.cpr.ca/cms/NR/rdonlyres
With Tracking rights on other lines:
http://www8.cpr.ca/cms/English/Customers/New+Customers/Where+We+Ship/default.htm
http://www8.cpr.ca/cms/English/default.htm
http://en.wikipedia.org/wiki/Canadian_Pacific_Railway

[elleng]

11. Wouldn't think of forgetting them!

NS and CSX combined to acquire Conrail, and Canadian National has Illinois Central and Wisconsin Central.

Conrail matter was a whopper of a complex case, initially had CSX and NS beating eachother over the head, 'OVER MY DEAD BODY' type talk! Anyone notice any diminution of trucks on roads in the East?

edit: Berkshire Hathaway's purchase of Burlington Northern lifts CN and CP shares.


http://www.google.com/hostednews/canadianpress/article/ALeqM5iFYIwI7J0yNVwbS6awrQ0OYF6zlA

[elleng]

12. Canadian National system

[happyslug]

15. Notice all four system connect to the Lower Mississippi River

While the Nile, Congo and Amazon Rivers are longer, from a commercial point of view all three together are minor river compared to the lower Mississippi (i.e St. Louis to New Orleans). The Interstate Highway System is Minor compared to the Lower Mississippi. The Upper Mississippi, the Missouri and Ohio River system (Along with other navigable rivers that flows into all three rivers) make up the single biggest water transportation system in the world. As you see, most rail lines connect to the east or west coasts and then to the Mississippi-Ohio-Missouri River system. Those barges (and the ships and barges on the related Great Lake Water System) provide the most serious competition to the big six railroads.

The US (and Canada, for we must count the Great lakes) have 8200 miles of Navigable inland waterways.

The Ohio and its Seven Navigable tributaries,
Allegheny River 69 Miles in Length from Pittsburgh to East Brady PA, see http://www.lrp.usace.army.mil/navchart/al/terminal.pdf for details)
Cumberland River
Kanawha River
Monongahela River (Which includes a mile into the Youghiogheny River at McKeesport PA and ends with about a mile in the Tygart River and West Fork River in West Virginia south of Morgantown West Virginia, a total of 128.7 miles in length for Navigation see http://www.lrp.usace.army.mil/navchart/mon/mile.pdf for details).
Tennessee River (Which connects also the the Tennessee-Tombigbee Waterway to Mobile Alabama, see http://en.wikipedia.org/wiki/Tennessee_River for details)
Green River Ky (61 miles in length for Navigation. See http://en.wikipedia.org/wiki/Green_River_(Kentucky) for Details)
Kentucky River (Only to Lock #4 in Frankfort Ky, Locks 5-14 are maintain for drinking supplies NOT navigation, see http://en.wikipedia.org/wiki/Kentucky_River for details).
http://www.lrp.usace.army.mil/nav/nav.htm#charts
http://crunch.tec.army.mil/enc/echarts/IENCShapeFileRequest.cfm
http://www.iwr.usace.army.mil/ndc/navchart/navindexmap.htm

The Mississippi has a similar source of other Navigable rivers that flow into it (and the Missouri), together most of the 8200 miles of navigable rivers is in this complex (The Great Lakes is #2, through no navigable rivers flow into the Great Lakes with the exception of the Chicago River which at one time did flow into the Great Lakes but in the late 1800s was reversed to flow into the Mississippi River AND the rivers the interconnect the Great Lakes themselves). While a distant #2 compared to the Mississippi River System, the Great Lakes Systems is one of the largest in the world (if not #2 to the Mississippi). The Amazon, the Nile, the Indus, the Ganges, the Yangtze, the Yellow and the Volga/Don/Northern Dvina (The heart of Russia) River systems are all similar in navigation to the Mississippi/Missouri/Ohio and Great lakes River systems River Navigation system. In many ways the Great Lakes is either as larger or larger then the above named river systems but it is clearly second to the Mississippi/Missouri/Ohio River system that is how large and important the Mississippi/Missouri/Ohio river system is (and connections between the two is easier then the Great Canal the Chinese built to connect the Yangtze and the Yellow Rivers, and is as easy as the Don-Volga Canal connecting those two rivers).

Yes, I did not mention the Rhine or the Danube. Both are better known then the above rivers for their are in Europe, but both are independent of each other from a navigation point of view AND smaller then any of the above named river systems. My Comment is the Railroads of North America are more often connecting the East Coast or West Coast to the Mississippi/Missouri/Ohio River system more then doing anything else (unlike Europe which has the greatest coast line of any continent, and for that reason tend to use the surrounding seas like we use the Great Lakes and the Mississippi/Missouri/Ohio River System).

My point is this purchase is part of HOW we ship goods around. In Europe most rail service is passenger for shipping by sea is often easier and quicker. In North America most rail service is freight as we connect the East Coast and West Coast to the Mississippi/Missouri/Ohio River system. Do to this greater dependence on Freight Railroads we have to be careful about HOW these railroads are controlled. I am not saying we should stop this transaction but do we want competition or regulation (or government ownership of the Railroads)? Once that question is decided (and the decision at the present time is competition) does this enhance competition? If yes, we should support the take over, if no we should oppose it.

[Brickbat]

13. Freight conductors wear hard hats.

:)

[4_TN_TITANS]

14. It's back to the future of transportation in this country.

Buffett can see the writing on the wall. A train can be powered by anything - diesel, wood, coal, electricity, mules, etc. It's the one mode of transportation / distribution that can meld to whatever energy source is cheapest and most plentiful. If I dabbled in stocks, I would have purchased rail stock years ago.