"Berkshire's $34 billion investment in BNSF is a huge bet on that company," Berkshire Chairman and Chief Executive Warren Buffett said in prepared statement.
"Most important of all, however, it's an all-in wager on the economic future of the United States," Mr. Buffett said. "I love those bets."
Mr. Buffett's move appears to be a bet that the freight industry is poised for recovery, though it hasn't shown much of a rebound yet. The best that most rail executives have said about freight volume is that it seems to have hit bottom. Mr. Buffett has said that he uses weekly railroad carload data as a proxy for the economy's health.
The acquisition exhibits Mr. Buffett's taste for solidly profitable companies that aren't dependent on cutting-edge technology.
Burlington is viewed as one of the best-managed U.S. railroads, though it has recently underperformed rivals and last month cut its fourth-quarter forecast. The company's $18.02 billion in sales last year made it just barely the No. 1 rail company in the U.S., ahead of Union Pacific Corp.
The purchase also would help secure a supply chain for Berkshire's rapidly expanding energy businesses. Berkshire owns MidAmerican Energy Holdings, which operates a natural-gas pipeline and power companies in the Midwest and Northwest. Burlington tracks run through the regions, a coal-supply route for power plants.
The $100 a share Berkshire is paying is a 31% premium to the railroad's closing price Monday. Berkshire also will assume $10 billion of Burlington Northern debt. Burlington's shares were up about 28% late Tuesday morning. Berkshire's Class A shares rose slightly.
Warren Buffett
The bid comes after a five-year "rail renaissance" that saw volume and pricing soar. That ended as the recession cut deeply into traffic and profits. Railroad operators have used the slump to boost efficiency, but future investment hinges on a slew of tax credits and other measures being pushed by industry executives in Congress.
Under the deal, Burlington Northern stockholders will have the choice to transfer each share for either $100 in cash or a variable number of Berkshire's Class A or Class B stock. Berkshire's board approved a 50-for-1 split of its Class B stock. The company said most of the stock issued by Berkshire in the acquisition would be A shares.
"We are thrilled to have the opportunity to become a part of the Berkshire Hathaway family," Matthew K. Rose, Burlington Northern's chairman, CEO and president, said in written statement.
Burlington Northern last month reported that third-quarter profit fell a less-than-expected 30% as revenue and volume fell across all its businesses.
The acquisition, which has been approved by the boards of both companies, is subject to approval by regulators and Burlington Northern shareholders. The companies expect the transaction to close in the first quarter.