Berkshire Hathaway To Buy Burlington Northern

Burlington Northern Santa Fe shares soared 28 percent in morning trading on the news. At the same time, other railway indices and stock rose on the news. Union Pacific (UNP.N) gained 8.1 percent to $59.50, CSX Corp (CSX.N) was up 8.5 percent to $46.50 and the iShares Dow Jones Transportation Average ETF ITY.P climbed 1.4 percent to $65.15.

Buffett told CNBC this was a big bet on the United States economy. Seemingly, he agrees with others that the recession is over, or at least ending. He indicated unless American businesses were producing goods and customers were buying them, railroad operators like Burlington Northern Santa Fe cannot do well. Thus, this is a gamble on the economy.

In a written statement, Buffett said, about the Burlington Northern Santa Fe deal, “It’s an all-in wager on the economic future of the United States. I love these bets.”

The Burlington Northern Santa Fe deal would rank as the largest acquisition in Berkshire Hathaway's history. In a separate move, Berkshire Hathaway said it was announcing a 50-to-1 split of its Class B common stock. In terms of the Burlington Northern buyout, however, the majority of stock issued by the company in its purchase will be its more expensive Class A shares, BRKA said.

There are currently no management changes expected at Burlington Northern Santa Fe as a result of the deal. It is expected to close sometime in early 2010, assuming, of course, the approval of shareholders and regulatory review by the Justice Department.