Buffett bets on transportation with deal
Warren Buffett's firm, Berkshire Hathaway, will buy giant rail company Burlington Northern Santa Fe in a deal worth $44 billion. Reporter Mitchell Hartman talks the details with Bill Radke.
A Burlington Northern Santa Fe engine pulls a train loaded with coal in Chicago, Ill. (Scott Olson/Getty Images)
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Juli Neimann, analyst at Smith, Moore & Company, talks with Steve Chiotakis about why Warren Buffett is participating in a deal in stock for the first time, and why she views the Stanley-Black & Decker deal as more of a merger. - Audio: Is Buffett on the right path with rail deal?
Douglas John Bowen, managing editor of Railway Age, talks with Bill Radke about what Buffett will get out of buying Burlington Northern Santa Fe.
TEXT OF INTERVIEW
Bill Radke: Warren Buffett's done some big deals in his life, but this is his biggest. His firm, Berkshire Hathaway, is buying the giant rail company Burlington Northern Santa Fe. Actually, he's buying the three-quarters of the company he doesn't already own. Total price: $44 billion. Marketplace's Mitchell Hartman joins us live to talk about this breaking news. Good morning, Mitchell.
Mitchell Hartman: Good morning, Bill.
Radke: What is behind this deal?
Hartman: Well, based on the statement from Berkshire Hathaway in Omaha this morning, it's about the economy. Buffet says, "It's an all-in wager on the economic future of the United States." So basically he's putting in a bet on rail, on transportation more generally, on Americans having to move stuff from here to there in greater volumes than they are right now in the recession.
Radke: Right, rail companies have not exactly been rolling in money and business lately.
Hartman: No, they haven't. Freight volume's been way down. They've mothballed thousands of rail cars. Now that is starting to turn around with the economic recovery, but it's only doing that slowly. Still, according to Mark Zandi of Moody's Economy.com, this isn't about today's economic indicators anyway.
MARK ZANDI: I think Buffet is right that a lot of the growth in our economy going forward will come from trade, trading with the rest of the world, and that will require a lot of shipping across this country and thus the rail investment. So it's not a bet on this year or next year, but over the next 10-20 years.
Zandi also points out that rail's more energy-efficient than other methods of transit. In fact, Buffet pointed that out when he explained this purchase for Berkshire Hathaway.
Radke: Marketplace's Mitchell Hartman joining us live. Thank you.
Hartman: You're welcome.
Comments
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From Ann Arbor, MI, 11/03/2009
Nowhere does this segment (or the evening one, either) mention how Berkshire is paying for BN-SF (BNI). Is it from cash on hand? Or is it by soaking up some of the miniscule amount of “credit” available to business?
From HI, 11/03/2009
"
energy-efficient than other methods of transit. In fact, Buffet pointed that out when
"
Going Forward
As Congress pours Sodium Silicate into the US Economic Engine the only remaining economic powers within this continent will be Mexico and Canada. Will the 44 billion dollar railway then remain as conduit between these great nations? Will USA be the panama canal between these two oceans of economic freedom?
But there will be added value in RR44. Hobos boarding the boxcars can be hired as mainsail personnel to lift high the spinnaker sails for *running with the wind* as dust-bowl prairie atmosphere pushes them along without proper trams to carry hydroelectric power from rocky mountains. If you believe in the unbelievable global warming, should you now be moving to Canada? Or do you prefer the flavor of Tequila?
And will Omaha be the site of a new capitol building as District of Columbia moves to the Big Red State?
U B Judge
!
TOOT TOOOOoooooooot
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