A major acquisition is coming to light this morning, as Berkshire Hathaway (NYSE: BRK.A, BRK.B) has announced that it is acquiring Burlington Northern Santa Fe (NYSE: BNI). The deal calls for BRK to dish out $100 per share in cash and stock for the 77.4% of BNI shares that BRK doesn't already own. The deal will cost BRK $44 billion. The acquisition gives us a glimpse into the mind of the Oracle of Omaha, BRK's CEO Warren Buffett. He feels that the "country's future prosperity depends on it having an efficient and well-maintained rail system." Buffett is betting that railroads are going to do well, which would stem from prosperity in the American economy.
Rail is often considered the backbone of the American economy, so economic recovery could lead to solid results for rail carriers. "Most important of all, however, it's an all-in wager on the economic future of the United States," said Mr. Buffett. "I love these bets." After the deal, Buffett says that BRK has more than $20 billion in cash.
Paying $100 per share for BNI is a rather high premium for the stock, but I am not going to question Warren Buffett (yet). With news of the acquisition, watch for the shares to challenge overhead resistance in the $90 region and further north in the $100 region. The good news is that the stock may be able to reclaim support from its 10- and 20-week moving averages. These trendlines acted as support in the past, and this morning's news should serve to catapult the stock back above these trendlines.
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
