Earlier this month,
's Berkshire Hathaway sent a letter to the Surface Transportation
) dated Dec. 18 stating that it completed the sale of two
short-line railroads ahead of schedule.
The sales came months after U.S. Sen. John Rockefeller (D-W.Va.),
who serves as chair to the Senate Committee on Commerce, Science
and Transportation, sent a letter to the STB expressing his
concerns about Berkshire Hathaway's acquisition of Burlington
Northern Santa Fe Railway Co. in 2010.
Rockefeller argued that Berkshire failed to acknowledge the two
short lines as the company continued its $44 billion BNSF deal.
"These multi-rail holdings raise questions about the federal
approval process of the acquisition in 2010," Rockefeller said,
requesting a federal review of the purchase.
The two short-line railroads in mention were White City Terminal
Union Railway LLC (WCTU) and RVTR Rail Holdings LLC.
Burlington Executive Vice President of Law and Secretary, Roger
Nober explained to the STB that Berkshire overlooked the two
railroads because of Berkshire's small positions in the
Burlington officials continued:
"The situation is unique because, despite a comprehensive
review of the assets of both companies, we only recently became
aware that two very small rail lines had been classified as rail
carriers, and therefore were subject to STB review. The two rail
carriers combined operate only 18 miles of track and are
innocuous holdings of two of the nearly 2,000 subsidiaries within
Berkshire's operating business groups. Nevertheless, this
oversight was technically out of compliance with Surface
Transportation Board regulations, which give that body the
authority to review the merger of companies that own rail
"Both Berkshire and BNSF went to great lengths before the
merger to meet the requirements of all regulatory bodies,
including the Department of Justice and the Federal Trade
Commission. These steps included Berkshire divesting
approximately $500 million in interests in other railroads."
Though Berkshire forgot about its WCTU and RVTR short-lines
during its acquisition of Burlington, it sold all of its 9.6
million shares of Union Pacific Corp. (
) and 1.9 million shares of Norfolk Southern Corp. (
) to meet federal regulations at the time.
In Berkshire's 2010 Annual Letter, Buffett wrote that Berkshire's
Burlington acquisition will "increase Berkshire's 'normal'
earning power by nearly 40% pre-tax and by well over 30%
Buffett also expressed how he and his partner, Charlie Munger,
were pleased about the transaction, as it was also a play on
"Both of us are enthusiastic about BNSF's future because
railroads have major cost and environmental advantages over
trucking, the main competitor. Last year, BNSF moved each ton of
freight it carried a record 500 miles on a single gallon of
diesel fuel. That's three times more fuel-efficient than trucking
is, which means our railroad owns an important advantage in
operating costs. Concurrently, our country gains because of
reduced greenhouse emissions and a much smaller need for imported
oil. When traffic travels by rail, society benefits."
Berkshire was long Burlington before completely acquiring the
company in 2010.
According to the American Short Line and Regional Railroad
Association, short-line railroads are critical for preserving the
connectivity to factories, grain elevators, power plants,
refineries, mines and transload facilities that employ over 1
million Americans. These freight rail infrastructures are only
maintained by private sector investments, as opposed to highway
infrastructures, which are maintained by federal and state
In a Burlington earnings letter released in the beginning of the
year, Buffett wrote:
"Though many people decry our country's inadequate
infrastructure spending, that criticism cannot be levied against
the railroad industry. It is pouring money - funds from the
private sector - into the investment projects needed to provide
better and more extensive service in the future. If railroads
were not making these huge expenditures, our country's publicly
financed highway system would face even greater congestion and
maintenance problems than exist today."
Below is a market value comparison of railroad stocks: Union
Pacific Corp. (
), Trinity Industries Inc. (
), CSX Corp. (
), MTR Corp. Ltd. (
), Canadian Pacific Railway Ltd. (
) and Norfolk Southern Corp. (
To view fundamental comparisons between these stocks, visit
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