Burlington Northern Santa Fe Corp. is holding a special meeting on Thurs. Feb. 11 to vote on the company’s proposed sale to Berkshire Hathaway Inc. If the deal is approved, as expected, Warren Buffett’s holding company will buy the 77% of Burlington shares it doesn’t already own.
Some or all of the proceeds from this takeout will be recycled by investors into other railroad stocks, which should increase the near-term buying pressure on the group. In fact, analysts at UBS estimate that of Burlington’s US$34-billion market capitalization, institutional and retail investors account for about US$17-billion.
“While it’s impossible to know how much will be recycled back into rails, it’s probably a minority—but a material minority or an immaterial minority?” analysts Rick Paterson and Fadi Chamoun asked in a report. “What we do know for sure is that it can’t be a bad thing, so in our view it’s better to be long rails in the near-term.”