Berkshire Hathaway in transition to an industrial conglomerate
04 Nov 2009
With the proposed acquisition of Burlington Northern Santa Fe, the second-largest railroad operator in the US after Union Pacific railways, Warren Buffett's Berkshire Hathaway has transformed itself from an investor in financial institutions to a mega operator of industrial firms.
By announcing its largest ever acquisition - to buy the 77.4 per cent it does not already own in Burlington Northern Santa Fe Corporation (BNSF) for $34 billion in cash and stock along with $10 billion debt (See: Berkshire Hathaway to acquire BNSF for $34 billion) - Warren Buffet has bet big on the recovery of the US economy.
The Oracle of Omaha had traditionally avoided investing in capital-intensive industries such as railroads and utilities, but had a huge liking for businesses like retailing and insurance.
In December 1998, Berkshire made its then biggest acquisition when it acquired General Re, the reinsurance giant, for $22 billion.
But, over the past eight years, Bufett has shifted his investment strategy and has poured billions into capital-intensive industries, which he had earlier shunned. He acquired MidAmerican Energy Holdings and Marmon Holdings, a holding company that manages over 100 subsidiaries with 250 production facilities in the US, the UK, Europe and China.
Bufett has also bet big in the electric car market by investing $231 million for a minority stake in BYD Co, China's largest maker of rechargeable batteries.
