Experts: Buffett's stakes in other railroads not problematic
(Dow Jones Newswires circulated the following story by Josh Mitchell on November 4, 2009.)
WASHINGTON, D.C. — Berkshire Hathaway Inc. (BRKA, BRKB) will likely be able to keep small stakes in two other freight-railroad operators in its bid to buy all of Burlington Northern Santa Fe Corp. (BNI), two former U.S. Justice Department officials said Wednesday.
Warren Buffett's firm already has shares in three of the nation's four major freight railroads. The deal announced this week would give the company full ownership of Burlington Northern, of which it currently owns about 23%, alongside Berkshire's existing small stakes in Union Pacific Corp. (UNP) and Norfolk Southern Corp. (NSC).
Berkshire Hathaway doesn't appear to hold shares in CSX Corp. (CSX).
The Justice Department plans to review the deal, said a department spokeswoman, adding that officials were trying to determine the exact review process the deal would have to undergo. At first blush, the purchase doesn't appear to need review by the Surface Transportation Board, which generally handles railroad mergers.
J. Bruce McDonald, a partner at Jones Day who served as deputy assistant attorney general in President George W. Bush's Justice Department, predicted the deal would easily pass regulators' muster. Because Berkshire's stakes in Union Pacific and Norfolk Southern are non-controlling and relatively small, they wouldn't likely raise antitrust concerns, McDonald said.
As of June 30, Berkshire owned 1.89% of Union Pacific's outstanding shares and .53% of Norfolk Southern's.
"The issues are probably very simple to resolve, and I predict that DOJ would be able to resolve them within the first 30 days" of receiving notice of the deal, McDonald said.
Former Bush antitrust official David L. Meyer agreed.
"As I comprehend the transaction, [Buffett] is essentially acquiring the railroad in order to own it, and not to combine it with some other competing business" said Meyer, now a lawyer at Morrison & Foerster.
A Berkshire Hathaway spokeswoman said the company wasn't immediately prepared to comment on the company's other railroad investments.
Robert Szabo, executive director and counsel for Consumers United for Rail Equity, which represents shippers in Washington, said he saw nothing problematic about Berkshire's small stakes in the two other railroads.
Thursday, November 05, 2009
