Monday, Berkshire Hathaway Inc. (BRK.A, BRK.B) said that the Federal Trade Commission granted early termination of the mandatory waiting period under the Hart-Scott-Rodino Antitruist Act for the proposed acquistion of remaining major share of railroad company Burlington Northern Santa Fe Corp. (BNI)
In a $44 billion cash-and-stock deal, that includes $10 billion of outstanding debt of Burlington Northern, Berkshire Hathaway will acquire the remaining 77.l4% outstanding shares of Burlington Northern Santa. The deal first announced on November 3, is projected as the largest acquisition in Hathaway's history. Warren Buffett, chairman of Berkshire Hathaway and one of the most successful investors in history, termed the deal as "... an all-in wager on the economic future of the United States."
Under the agreement, Berkshire Hathaway would pay $100 per each remaining outstanding BNI share in cash and stock to increase its holdings to 100%. Each share of BNI common stock would be converted into either a cash payment of $100 or a variable number of shares of Berkshire Hathaway Class A or Class B common stock. Up to 60% of the deal is cash while 40% would be in stock.
The stock component of the deal is subject to a 'collar', which fixes the value of each Berkshire Hathaway share received at $100 if the price of Berkshire Hathaway Class A stock at closing is between $80,000 and $125,000 per share.
If the value of Berkshire Hathaway Class A stock is outside of the collar range at closing, then the number of shares received of Berkshire Hathaway Class A stock will be fixed at either 0.001253489 per BNSF share for values below the collar range or 0.000802233 per BNSF share for values above the collar range.
Shareholders would receive Class A or equivalent economic value of Class B Berkshire Hathaway shares in lieu of fractional Class A shares, subject to certain limitations laid out in the definitive agreement. Burlington Northern Santa and Berkshire still expect the transaction to close in the first quarter of 2010.
Earlier on November 20, Berkshire Hathaway signed a deal with JPMorgan Chase and Wells Fargo for an $8 billion credit line as a potential additional source of funds to help pay for its acquisition of BNSF.
Berkshire had said it expected to fund about 50% of the total cash consideration of about $16 billion with internally generated cash and the remainder with borrowings expected to be repaid over a three-year period.
Berkshire Hathaway had also said it obtained the $8 billion unsecured credit facility potential only to finance the acquisition of Burlington Northern, and plans to pay back the loan over three years.
Berkshire also announced a 50-for-1 split of its Class B Common Stock and said the great majority of the stock issued by Berkshire in the BNSF acquisition would be Class A shares. However, Class B shares would also be needed to accommodate holders of smaller amounts of BNSF shares who opt for a share exchange rather than a cash payment. By splitting Class B shares 50-for-1, the company expects to accommodate even the smallest holdings of BNSF shares that elect a tax-free exchange. The company reportedly would consider its share splitting decision by shareholders vote in its special meeting on January 20, 2010.
BRK.A is gaining $280.0 or 0.25% and is trading at $99,969 on a volume of 638 shares on the New York Stock Exchange. BRK.B is trading at $3,331.00, up $11.00 or 0.33%, on a volume of 17 thousand shares.
BNI is trading up $0.10 or 0.10%, and is at $98.76 on a volume of 1.87 million shares on the New York Stock Exchange.
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