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China trade boost prompted Buffett Burlington buy
(China Daily/Agencies)
Updated: 2009-12-23 08:07
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Billionaire Warren Buffett, chairman of Berkshire Hathaway Inc, told employees of Burlington Northern Santa Fe Corp that he's buying the railroad because of its position in the US West.
"I think the West is going to do well," Buffett told workers of Burlington Northern during an in-house interview with the railroad's chief executive officer, Matthew Rose. "I'd rather be in the West than the East."
The $26 billion purchase of Fort Worth, Texas-based Burlington Northern is the biggest of Buffett's career, and what he called an "all-in wager" on the US economy. Burlington stands to benefit from an increase in shipments of goods from the US's Asian trading partners, including China.
"I think I know how the country is going to develop," Buffett, 79, said in the interview, which was posted in a video on Burlington Northern's intranet and distributed yesterday in a regulatory filing as a transcript.
Buffett divested Berkshire's equity stakes in two competing railroads, Omaha-based Union Pacific Corp and Norfolk Southern Corp of Norfolk, Virginia, as part of the Burlington Northern transaction, he has said.
China ran up a record $266 billion trade surplus with the US last year.
China, the second-largest US trading partner after Canada, may boost exports by 20 percent in the first quarter of 2010 as the global economy recovers, according to Macquarie Securities Ltd and Royal Bank of Scotland Group Plc.
Berkshire has advanced 2.3 percent this year on the New York Stock Exchange and Burlington Northern is up 30 percent. The companies said the merger may be completed in the first quarter.
Buffett, Berkshire's CEO, is taking out $8 billion of debt to finance the purchase and risking Berkshire's AAA credit rating, which Standard & Poor's has said it may cut. He told the Burlington Northern employees that he won't sell the railroad's assets to pay debt and plans to continue investing in the company's infrastructure.
"It'd be crazy if we didn't," Buffett said. "We're not going to buy a business and starve it."
Buffett and a staff of about 20 people in Omaha oversee a collection of Berkshire operating companies that employ more than 200,000 and sell goods and services including energy, candy, clothing and luxury flights.
Burlington Northern brings Berkshire another 40,000 workers, and Buffett said the takeover won't have an effect on employment.
"We've got 20 people in Omaha, and there isn't one of them that knows how to run a railroad," Buffett said.
"You'll be running the railroad, and you'll run it in an efficient way, and when times are good, you're going to have more people employed than when times are bad."
