Warren Buffett's Berkshire Hathaway Inc. on Tuesday agreed to buy Burlington Northern Santa Fe Corp., making a $34 billion bet on the future of the U.S. economy.
Burlington Northern, the nation's second-largest railroad, is the biggest hauler of food products like corn and coal for electricity, making it an indicator of the country's economic health. The railroad also ships a large amount of goods — including everyday items such as refrigerators, clothing and TVs_ from Western ports like Los Angeles, Long Beach, Calif. and Seattle.
Analysts say Buffett is planting both feet in an industry that is poised to grow as the economy gets back on solid ground. If approved, it would be the biggest acquisition ever for Berkshire Hathaway Inc. ....
Burlington is one of the least optimistic among major railroads about the pace of economic recovery. CEO Matt Rose said consumers will be the driver of any improvement in the economy, but no one is buying yet. Coal shipments to power plants have fallen off sharply because of lower electricity demand. Burlington Northern hauls enough coal to power one out of every 10 homes in the U.S.
The coal hauled by Burlington Northern is mined from places like the Powder River Basin in Wyoming and Montana. It's lower in sulfur than the coal found in the eastern U.S., meaning its less polluting and more in demand now that stricter emissions standards are being imposed on coal plants.
Berkshire owns major utilities that rely on coal through its MidAmerican Energy Holdings Co.
AP
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