Buffett to buy Burlington Northern

NEW YORK: Warren Buffett���s Berkshire Hathaway agreed to buy railroad Burlington Northern Santa in what he described as an ���all-in wager on the economic future of the United States.��� The purchase, the largest ever for Berkshire, will cost the company $26 billion, or $100 a share in cash and stock, for the 77.4% of the railroad it doesn���t already own. Including his previous investment and debt assumption, the deal is valued at $44 billion, Omaha, Nebraska-based Berkshire said on Tuesday in a statement.

Berkshire has been building a stake in the Fort Worth, Texas-based railroad for more than two years as Buffett looked for what he called an ���elephant���-sized acquisition in which he could deploy his company���s cash hoard, which was more than $24 billion at the end of June. Trains stand to become more competitive against trucks with fuel prices high, he has said.

���It is Warren being Warren, taking advantage of a market that is soft at a time when the possibility for competitive bids is relatively low,��� said Tom Russo, a partner at Gardner Russo & Gardner, which holds Berkshire shares. ���He looks at this as a business that has advantages against other forms of transportation.���

At $100 a share, Buffett is paying 18.2 times Burlington���s estimated 2010 earnings of $5.51, according to the average analyst projection. The deal culminates a search by Buffett, 79, that sent him to Europe looking for possible acquisitions and lamenting in letters to shareholders that he and vice-chairman Charles Munger couldn���t find companies they considered large enough to meaningfully add to annual earnings. Buffett needs ���elephants in order for us to use Berkshire���s flood of incoming cash,��� he said in his annual letter to shareholders in 2007.