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Executive Producer
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Berkshire Hathaway surprised the financial world this morning with word it is buying the roughly 77% of Burlington Northern shares it doesn't already own for a combination of cash and Berkshire Hathaway shares.
Burlington shares are up over 28 percent, trading at $97.50 as of mid-morning. They closed at $75.32 yesterday (Monday.)
Current price: [BNI
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It's the biggest acquisition by Berkshire ever, and very unusual, because Buffett typically does all-cash deals.
On CNBC's Squawk Box this morning, (full transcript), Buffett told us the deal came together in "about 15 minutes" after he made an offer a week ago Friday in Fort Worth to Burlington CEO Matt Rose.
Buffett has consistently said that he expects the U.S. economy will rebound to become stronger than ever over the next five years. Berkshire has been buying Burlington shares over the past few years, (Berkshire's stake topped 22 percent with a purchase last February), anticipating the railroad will make money as the economy grows because it will be able to move more goods, using less energy, than other modes of transportation:
"They do it in a cost-effective way and extraordinarily environmentally friendly way. BNSF last year moved on average, it moved a ton of goods 470 miles on one gallon of diesel. It releases far fewer pollutants into the atmosphere. It saves enormously on energy consumption and, you know, it diminishes highway congestion. Rails last year moved 40 percent, more than 40 percent, over the country. They moved more than all those trucks, just the four big railroads. It's a very effective way of moving goods. I basically believe this country will prosper and you'll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit. It's a bet on the country, basically."
Another enormous surprise: Berkshire will split its "baby" Class B Berkshire shares 50-for-one, bringing their price per share down from over $3000 each to roughly $65. Buffett says he did it to facilitate the Burlington buy:
"I'm not big on stock splits. But by having this split, it enables anybody that has as little as one share of BNSF to opt for the tax-free exchange... So those small shareholders can have exactly the same availability that otherwise would only have been available to a big shareholder."
The Class A shares, currently trading just under $100,000 each, are not affected by the split.
A full transcript of Buffett's conversation on Squawk Box this morning will be posted here on Warren Buffett Watch later today.
Current Berkshire stock prices:
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Class A: [BRK.A
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Class B: [BRK.B
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Data is a real-time snapshot *Data is delayed at least 15 minutes