Buffett’s Railroad Adventure: 12 Days and $26 Billion

In “Brewster’s Millions,” Richard Pryor struggled to spend $30 million in 30 days.

Maybe he could have gotten some tips from Warren Buffett.

Two months ago, the Oracle of Omaha spent $26 billion in just 12 days. All he had to do was buy a railroad.

Associated Press

It has been reported before that Berkshire Hathaway’s purchase of Burlington Northern came together quickly.

But an SEC filing late last week on the deal sheds light on just how quickly it came together.

Of course, it’s far easier to get a deal done when there are no rival bids and negotiations over prices are largely nonexistent.

Here’s quick breakdown of how the deal unfolded, as gleaned from that filing:

Oct. 22: Burlington Northern CEO Matthew Rose met with Buffett, who owns 22.6% stake in Burlington.

The pair discussed Burlington’s overall business among other general issues in the previously scheduled meeting.

Berkshire acquiring Burlington isn’t among the topics of conversation. 

Oct. 23: Buffett’s assistant sets up a another meeting with Rose for later that evening.

There, Buffett expresses his interest in acquiring Burlington for $100 a share, if the railroad’s board is receptive.

Oct. 24: Rose tells Ed Whitacre, Burlington’s lead director about the conversation.

Oct 24-26: Rose contacts board members, as well as bankers Goldman Sachs Group and Evercore Partners.

Oct. 26: Burlington holds a special meeting to discuss the proposal.

Oct. 27: Rose calls Buffett to inform him of the board meeting and to further discuss a deal.

Rose asks about Buffett’s investments in two other railroads.

Buffett says that if a deal is struck he would sell his stakes in the other railroad companies.

He also tells Rose he is willing to put a collar of the stock portion of the deal and would recommend 50-for-1 stock split for Berkshire’s class B shares so that Burlington investors could obtain more Berkshire common stock instead of cash for fractional shares. 

Oct. 28: Rose updates his board about the conversation with Buffett the previous day.

Board also reviews its various options and authorizes Rose to enter into discussions with Berkshire.

Later that day Rose calls Buffett to discuss the structure of the deal further.

During the conversation, Rose broaches the topic of Buffett raising his offer. Buffett says $100 a share was all he was willing to pay.

At the end of the conversation, Buffett says he will have Berkshire’s outside counsel draft a merger agreement.

Oct. 29: Berkshire’s outside counsel circulates a draft of a merger agreement.

Oct. 30: The two firms enter a confidentiality agreement.

Oct. 30- Nov. 2: Burlington, Berkshire and the firms’ legal advisers negotiate other terms of the deal.

Nov. 2: The boards of Berkshire and Burlington each meet and approve the merger.

Nov. 3: The deal is announced.