Four years have passed since Berkshire Hathaway announced that it would acquire Burlington Northern Santa Fe in a cash and stock transaction. This article looks back at the transaction and attempts to determine whether it was a good deal for Berkshire.
Warren Buffett is not a proponent of using the concept of “synergies” to justify acquisitions and generally encourages Berkshire Hathaway subsidiaries to operate independently. Business unit managers, or “all stars” as Mr. Buffett referred to them in his biennial letter
As we discussed last week in our coverage of Berkshire Hathaway’s second quarter results, the company’s newly acquired railroad subsidiary posted improved results for the quarter. Burlington Northern Santa Fe posted net earnings of $603 million on revenues of $4,094 million. Since the consolidation of Burlington Northern at the close of the acquisition on February 12, 2010, the company has posted net earnings of $885 million on revenues of $6,167 million. In this article, we will focus on Burlington Northern’s somewhat surprising $250 million dividend payment to Berkshire Hathaway in the second quarter and what meaning this has, if any, on plans for future capital expenditures.
Berkshire Hathaway posted sharply higher operating profits for the second quarter of 2010 thanks to strength in the insurance operations and major improvements in the company’s diverse collection of economically sensitive subsidiaries. However, quarterly net earnings declined to $1.97 billion from $3.3 billion in the prior year period primarily due to losses in the derivatives portfolio caused by broad declines in market indices in the second quarter. Book value per share declined to $86,661 per Class A share, down 3 percent for the quarter due to unrealized losses in Berkshire’s large portfolio of publicly traded stocks. Read this article for full details on Q2 Results.
There is little doubt that Amtrak’s Acela represents a very attractive way to travel between Washington D.C. and New York City. Leaving Washington D.C. a very short distance from the United States Capitol, one can arrive at Penn Station in midtown Manhattan in roughly two hours and forty five minutes. While catching a flight between Washington and New York is a viable alternative, it is necessary to leave the city center to reach the airport. Combined with security procedures, it can easily take longer to travel between central locations in the two cities by air compared to the speed offered by America’s version of “high speed rail”. Read this article for more details on potential conflicts between high speed rail and America’s freight railroads.