Sell Burlington Northern Santa Fe (BNI)
posted on January 5, 2010 at 2:22 pm
This one is very simple: Warren Buffett’s Berkshire Hathaway (BRK.A) is buying the Burlington Northern Santa Fe (BNI) railroad for $100 a share.
So I’m selling it out of my long-term Jubak Picks 50 portfolio because in the long-term this stock isn’t going to be around.
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Sorry, but what do you mean by “isn’t going to be around”?
If BRK is still buying it up, why would it be good to sell?
So what happens if we decide to hold onto the Burlington shares? Do they get converted to Berkshire shares?
Check the BNI Investor Relations to see exactly what the exchange is to BRK stock. I thought I read that BRK.B is doing a 1 for 50 split in order to accomodate the smaller BNI shareholders. Last I looked BRK.B was at $3,330ish/share. BRK has 2 classes of stock A and B. Check out what rights come with the class you will inherit.
Here’s the language from the Nov 3 press release announcing the deal. BNI shareholders have an option of getting cash or cash and stock. Here’s a link to the full release too. http://www.berkshirehathaway.com/news/NOV0309.pdf
From the press release:
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.
The transaction requires approval by holders
Wow…I was expecting to hear from some of my fellow readers, not the man himself…thanks for the reply Jim.
Jim
Some feel best coarse of action is to take the Berkshire stock- you obviously disagree. Why
Personally I’ll be taking the BRK stock, however that’s because I’ve always wanted to own some BRK stock but at the B price haven’t been able to put together a large enough purchase. With BRK.B doing a 50-1 split I’ll pick up some more. However I still may come back and look at some of the other railroads. With BNI going in to BRK and taking BRK stock you are getting much more then a railroad. While BNI is BRKs largest purchase, there’s a lot else going on at BRK. And for all the reasons I purchased BNI I may look at another pure play railroad. Perhaps Canadian.