Berkshire Hathaway paid around $US 100 a share in cash and stock for the remainder of the company, a 31.5% premium on
BNSF’s share closing price Monday on the New York Stock Exchange.
Morgan Stanley Research analysts Mr William Greene, Mr Adam Longson, and Mr John Godyn told IRJ's US sister magazine Railway Age: “Buffett believes rail looks cheap. Berkshire's acquisition is a long-term bet on
railroads and the US economy, but also signals there is significant value in rail
stocks today.” Despite scepticism in some quarters that BNSF’s earnings per share
don’t justify the premium being offered by Berkshire Hathaway,
“Berkshire's successful investment track record suggests Buffett believes he is
likely to enjoy a substantial rate of return, despite the premium. In other words,
consensus estimates are far too low for 2010,” the analysts said.
 "Our country's future prosperity depends on an efficient and
well-maintained rail system," says Buffett. "Conversely, America must
grow and prosper for railroads to do well. Berkshire's $US 34 billion
investment in BNSF is a huge bet on that company, CEO Mr Matt Rose and
his team, and the rail industry. But, most important of all, it's an
all-in wager on the economic future of the United States. I love these
Buffett has already made it clear he believes rail has a distinct advantage in
energy efficiency over other modes. At Berkshire Hathaway’s annual
meeting in May, he noted, “As oilprices go up, fuel raises costs for rail, but it raised costs for lorries, roughly by a factor of four.”
Mr Luther Miller, Senior Editorial Consultant to Railway Age, believes the deal could change attitudes
to the rail industry. "This could profoundly affect the way the country
and Wall Street perceives railways," he says.
Wall Street responded enthusiastically to news of the sale on Tuesday morning, with BNSF share prices soaring 28% to to almost $US 100, the highest level for 12 months.
In recent years Berkshire Hathaway has consistently increased its stake in BNSF, and in 2007, at a time when it was increasing its shares in BNSF, the company sold its holdings in two other US Class 1s, Norfolk Southern and Union Pacific.