Warren Buffett’s Berkshire Hathaway Inc on Tuesday agreed to buy Burlington Northern Santa Fe Corp, making a $34 billion bet on the future of the US economy.

Burlington Northern, the US’s second-largest railroad, is the biggest hauler of food products like corn and coal for electricity, making it an indicator of the country’s economic health. The railroad also ships a large amount of goods — including everyday items such as refrigerators, clothing and TVs — from Western ports like Los Angeles, Long Beach, California and Seattle.

Analysts say Buffett is planting both feet in an industry that is poised to grow as the economy gets back on solid ground. If approved, it would be the biggest acquisition ever for Berkshire Hathaway Inc.

Berkshire Hathaway already owns about 22 per cent of Burlington Northern, and said it will pay $100 a share in cash and stock for the rest of the company, a 31.5 per cent premium on Burlington Northern’s Monday closing price. Shareholders have the option to convert their stock for a cash payment of $100 per share or receive Berkshire Class A or Class B common stock. Up to 60 per cent of the deal is cash and 40 per cent is in stock.

“Berkshire’s $34 billion investment in BNSF is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry,” Buffett said in a statement.

“Most important of all, however, it’s an all-in wager on the economic future of the United States. I love these bets,” he said.

... contd.