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By Tony Hatch
The "Sage of Omaha" placed more of his chips on Fort Worth, offering $100 per share for the 77 percent of Burlington Northern Santa Fe Corp. that he didn't own, or a solid 30 percent premium to the pre-announcement price, valuing the enterprise at $44 billion.
The price might seem rich if you're looking at the economy through a near-term prism, but the actual forward (2010 consensus) multiple compares well with past deals — including the recent short-line offerings. Warren's elephant deal follows his $4.5 billion purchase of Marmon Holdings Inc. in late 2007, so he already was moving toward rail industry ownership. This obviously reflects well on the industry as a whole, and on the tempering fears of over-aggressive re-regulation. A few additional thoughts:
Again, this is only partially "an all-in bet on the American economy" — it is a secular bet on rail and on BNSF, and purchased rather cheaply. So, to answer the question we've been asked so often: I know why Warren is buying.
Tony Hatch is an independent transportation industry analyst and consultant.