Wednesday, November 4, 2009

Working the railroad

“This is all happening because my father didn’t buy me a train set as a kid,” Mr. Buffett joked in an interview.

America’s best-known investor, Warren E. Buffett, is making his biggest bet yet on the nation’s economic future by buying, of all things, a railroad.

After deftly capitalizing on the financial crisis with a series of bold deals, Mr. Buffett on Tuesday agreed to buy the 131-year-old Burlington Northern Santa Fe Corporation.

If I recall correctly, that Santa Fe part of the conglomerated name is th eold, renown Hutchinson, Topeka and Santa Fe.

Even as the credit markets have improved and banks have become less skittish about lending, few companies can muster Mr. Buffett’s financial firepower. Berkshire will borrow $8 billion to supplement $8 billion in cash from its books, paying off the debt in three annual installments.

Although it has the cash, Berkshire will borrow, presumably for tax advantages.

The Journal's article had these interesting details:

On Sunday afternoon, Burlington also hired Evercore Partners and its chairman, Roger Altman -- in part because of Mr. Altman's long relationship with Burlington lead board member Ed Whitacre. Both men worked on deals involving SBC Communications, where Mr. Whitacre was CEO, and General Motors, where Mr. Whitacre is lead independent board member.

Interlocking ties.

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