Tuesday, November 3, 2009

Berkshire Splits, Pigs Fly (BNI; BRK.B)

Jan. 20, 2010 UPDATES:
"Berkshire Options Trading May Outpace Cemetery Firm" (BRK.A; BRK.B)
Berkshire Shareholders Approve Stock Split, With Paper Cutout of Charlie Munger Looking On (BRK.A; BRK.B)
CNBC Transcript: Warren Buffett's 'Stock Split' Interview (BRK.A; BRK.B)
UPDATES below.
Original post:
I was planning a post on Mr. Buffett's partner Charlie Munger when I heard this news. We might hook up with Charlie this afternoon.
Burlington Northern Santa Fe is the largest coal hauler out of the Powder River Basin of Montana and Wyoming. They are such a big player that this coal is responsible for 10% of the entire nation's electricity.
As Mr. Buffett said about the acquisition:
“Most important of all, however, it’s an all-in wager on the economic future of the United States,” said Mr. Buffett. “I love these bets.”

Here's Barron's Stocks to Watch Today, from whom I stole the headline:

There goes the neighborhood.

Warren Buffett is doing something he hasn’t often done: he’s splitting the class B shares of his Berkshire Hathaway (BRKB) stock by 50 to 1, meaning you’ll soon be able to buy into Berkshire for $65.30 a share instead of $3,265.

The move comes in conjunction with Buffett’s announcement his company will buy Burlington Northern Santa Fe (BNSF) railroad company for $100 per share through a combination of cash and stock, a 30% premium to its closing price yesterday.

Burlington stock is up 29% in pre-market trading at $98.09, while Berkshire class B is up $100.90, or 3.1%, at $3,365.90.

The split is subject to Berkshire shareholder approval. No date has been set for the shareholder vote yet, nor for the record date of the split.

Berkshire already owns 23% of Burlington. Berkshire says its offer totals $44 billion, including the portion it already owns, and it’s picking up $10 billion of Burlington debt, making this the largest deal Berkshire has ever done. The split will allow those Burlington investors who want to take stock instead of cash to do so, effectively allowing Buffett to use more of his own currency — his stock....

The Washington Post (a Berkshire-Hathaway company, 18.4%) is using AP and Reuters stories.

Here are the press Berkshire releases:

Berkshire Hathaway Inc. Board of Directors Approves 50-for-1 Split of Its Class B Common Stock

"...The definitive agreement provides that each share of BNI common stock will at the election of the shareholder be converted into the right to receive either
(i) a cash payment of $100.00 or
(ii) a variable number of shares of Berkshire Hathaway Class A or Class B common stock, subject to proration if the elections do not equal approximately 60 percent in cash and 40 percent in stock. The stock component of the consideration is subject to a “collar” whereby the value of each Berkshire Hathaway share received is fixed at $100.00 if the price of Berkshire Hathaway Class A stock at closing is between approximately $80,000.00 and approximately $125,000.00 per share. If the value of Berkshire Hathaway Class A stock is outside of this collar range at closing, then the number of shares received of Berkshire Hathaway Class A stock will be fixed at either 0.001253489 per BNI share for values below the collar range, or 0.000802233 per BNI share for values above the collar range. The shareholder may receive Class A or, in lieu of fractional Class A shares, equivalent economic value of Class B Berkshire Hathaway shares, subject to certain limitations as described in the definitive agreement...."
Here's Berkshire's description of the A and B shares:

From: Warren Buffett
Subject: Comparative Rights and Relative Prices of Berkshire Class A and Class B Stock
Date: February 2, 1999 Updated July 3, 2003

Comparison of Berkshire Hathaway Inc. Class A and Class B Common Stock

One geographic oddity, major BNI competitor, Union Pacific, is headquartered just under two miles due west of BRK headquarters.
MarketBeat on Berkshire Hathaway/Burlington Northern Santa Fe

Pssst, Besides Warren Buffet, Which Berkshire Hathaway Director is a Railroad Fan? (BRK.a; BNI, CNI CSX; NSX; UNP)

Warren Buffett bets on coal and the economy (BNI; BRK.B)

Groovin' and Behoovin' at WBRK, All Berkshire, All the Time (Berkshire- Burlington Roundup) BRK.a; BNI

Bloomberg Special Report: "Buffett Buys Burlington" BRK.A; BRK.B; BNI