News, analysis and personal reflections on the markets & the financial sector

Friday, November 6, 2009

Warren Buffett to be sued over BNSF investment

Warren Buffett's investment firm Berkshire Hathaway is set to be taken to court by investors in relation to its proposed buy-out of Burlington Northern Santa Fe Corporation (BNSF), a media report has said.

Earlier this week, it was revealed that Mr Buffett's company was set to pay $34 billion to acquire complete control of BNSF, which is the biggest goods transporter operating in the US.

It will also take on $10 billion worth of BNSF debt.

Berkshire Hathaway already had a minority stake in BNSF and the new deal, in which the company will pay $100 a share, is set to give Berkshire Hathaway the 77.4 per cent of shares it did not previously own.

But it has been reported by Bloomberg that both BNSF and Berkshire Hathaway have been named in a lawsuit regarding the deal, which claims directors at BNSF did not give shareholders enough information about whether or not they should tender their shares for the merger agreement.

The lawsuit was filed in a Texas state court yesterday and reportedly accused BNSF directors of engaging in a "blatant effort to ensure that controlling shareholder, Berkshire, their favored partner, is Burlington Northern's ultimate acquirer."

Neither BNSF nor Buffett has commented on the prospective legal action facing them so far.

When the deal was announced, Matthew Rose, BNSF chairman, president and chief executive officer, claimed the deal was in the best interests of everyone involved.

"This transaction offers compelling value to our shareholders and is in the best interests of all of our constituents including our customers and employees," he said in a statement.

Warren Buffett himself described the move as an "all-in wager on the economic future of the United States" and stated his belief that the country's future prosperity relies on having a well-maintained and efficient rail industry.

No comments: