Berkshire Buying Burlington Northern Railroad

Warren Buffett's Berkshire Hathaway Inc. on Tuesday said it agreed to buy Burlington Northern Santa Fe Corp. in a deal valuing the railroad at $34 billion.

Berkshire Hathaway already owns a stake of about 22 percent in Burlington Northern, and said it will pay $100 a share for the rest of the company.

The majority of the stock issued in the deal will be Berkshire's "A" shares, but Berkshire's board also approved a 50-for-1 split of its Class B common stock for holders of smaller amounts of Burlington shares who opt for a share exchange rather than cash. Berkshire's Class B shares closed Monday at $3,265. With the split, each share will be worth $65.30. Burlington shares closed Monday at $76.07. The shares shot up over 29 percent to $98.25 in premarket trading.

The deal has been approved by the boards of both companies. It would be the biggest acquisition ever for Berkshire Hathaway Inc.

Berkshire also owns MidAmerican Energy Holdings, which controls power companies in the Midwest and Pacific Northwest. The railroad could be a strategic acquisition because its tracks run right through both regions, a major coal supply route for power plants.

The chairman of MidAmerican Energy has come out vocally against climate change legislation which targets coal-fired power plants.

Burlington Northern Santa Fe is the country's second-largest railroad with a market capitalization - the market value of the company's outstanding shares - of about $25.9 billion.

Last month the company reported third-quarter profit dropped 30 percent to $488 million, or $1.42 per share, as people continued to hold back on purchasing goods from stores and industrial production continued to struggle.