Buffett Buying Burlington Northern In $44 Billion Deal

November 3, 2009 11:09 a.m. EST

Omaha, NE (AHN) - Berkshire Hathaway, the holding company led by billionaire Warren Buffett, announced Tuesday it will spend $44 billion to buy Burlington Northern Santa Fe.

Berkshire Hathaway will pay $100 a share in cash and stock for the 77.4 percent of the railroad it did not already own. That's a 30 percent premium over Burlington's closing price on Monday.

The deal, which includes the assumption of $10 billion in debt, means that Buffett is paying 18.2 times Burlington's estimated 2010 earnings of $5.51. The transaction is the largest in the history of Berkshire Hathaway and represents "an all-in wager on the economic future of the United States," Buffett said in a statement.

To help pay for the acquisition, Berkshire will split its class B shares 50 to 1. Berkshire will borrow $8 billion and dip into its treasury for another $8 billion. Afterwards, Berkshire will have $20 billion cash on hand.

Fort Worth, Texas-based Burlington Northern has 32,000 miles of track and employs 40,000 people, according to the company web site. More than 10 percent of electricity produced in the U.S. is generated from coal hauled by the railroad. It also is one of the largest grain-hauling railroads in the U.S. and moves enough lumber each year to built more than 500,000 homes.

At 10:34 a.m., Burlington (BNI) shares were up 28 percent to $97.44.