Why The Warren Buffet Railroad Purchase?

It felt like a throwback to decades ago when we heard or read about the Warren Buffet railroad purchase. What did this mean in the 2000s? What did Mr. Buffet know that no one else was even thinking about?

In 2009 Berkshire Hathaway, the holding company owned by Warren Buffet, bought Burlington Northern Santa Fe, LLC. (BNSF) Railway. BNSF was formed in the 1990s as an entity to expedite the merger of the Burlington Northern Railroad and the Atchison, Topeka and Santa Fe Railway. This then became a railway system that covered two-thirds of the western U.S., made up of 32,000 miles of rail.

Warren Buffet’s move began in November 2009. Berkshire Hathaway offered twenty-six billion dollars for 77.4 % of BNSF. That is the portion of the company that Berkshire Hathaway did not already own. When all was said and done the acquirement was said to be valued at forty-four billion dollars. The procurement was completed on February 12, 2010. That is when the company became Burlington Northern Santa Fe, LLC. It is considered an indirect subsidiary of Berkshire Hathaway, as it was merged into R Acquisition Company, LLC, also a wholly owned subsidiary of Berkshire Hathaway.

Why this purchase? When discussing it, Warren Buffet pointed out that the other means of moving freight, trucks, uses much more fuel. By his figures, trains are three times more efficient than trucks in terms of diesel fuel used. This makes us less dependent on imported oil. The environment is benefited in terms of reduced toxic emissions.

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