Most of the time, covering the railroad industry for Hoover’s just isn’t that exciting. Thankfully, things picked up last week when investor super stud Warren Buffett made huge waves in the industry by announcing his Berkshire Hathaway investment firm was snatching up a leading US railway company. The total price? $44 billion. It is Berkshire Hathaway’s largest acquisition since … ever.
In a move he called an “all-in wager on the economic future of the Unites States”, Buffett is buying Burlington Northern Santa Fe, the nation’s second largest railroad. Burlington mostly hauls food products and coal used for electricity. It also transports clothing, TVs, and electronic devices — you know, pretty much everything else the country needs.
“Our country’s future prosperity depends on its having an efficient and well-maintained rail system,” Buffett said.
I would imagine Burlington is pretty satisfied, hoping that Buffett’s potential long-term investment in its company signals a message that the freight industry is on the road to recovery. The buyout is expected to close in the first quarter of 2010.
Buffett is betting everything on this deal, and for the most part analysts are pleased. When it comes to freight transportation, railroads are extremely cost-effective and environmentally friendly. According to the Federal Railroad Administration, freight transportation is expected to increase by 90% between 2007 and 2035.
Seems like another smooth move for the Oracle of Omaha.
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Picture by Raymond Shobe, used under a CC-Share Alike license.
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