Buffett on railroad purchase: It's all about looking West

Billionaire Warren Buffett did his best Horace Greeley imitation Monday as he addressed employees of Burlington Northern Santa Fe Corp.

Buffett, who is closing in on final approvals to acquire the railroad company, told employees that he’s buying the railroad because of its position in the U.S. West.

“I think the West is going to do well,” Buffett said during an in-house interview with the railroad’s chief executive officer, Matthew Rose. “I’d rather be in the West than the East.”

The $26 billion purchase of BNSF, which maintains a major rail hub in the Kansas City area, is the biggest of Buffett’s career, and what he called an “all-in wager” on the U.S. economy. BNSF stands to benefit from an increase in shipments of goods from the U.S.’s Asian trading partners, including China.

“I think I know how the country is going to develop,” Buffett, 79, said in the interview, which was posted in a video on BNSF’s intranet and distributed Monday in a regulatory filing as a transcript.

Buffett, who is chairman of Omaha-based Berkshire Hathaway, divested Berkshire’s equity stakes in two competing railroads, Omaha, Nebraska-based Union Pacific Corp. and Norfolk Southern Corp. of Norfolk, Virginia, as part of the BNSF transaction, he has said. The two companies are “good investments,” and Berkshire would have continued to own the stakes if the BNSF takeover didn’t happen, Buffett said in an interview with Charlie Rose broadcast in November on PBS.

Berkshire has advanced 2.3 percent this year through Monday on the New York Stock Exchange and BNSF is up 30 percent. The companies said the acquisition may be completed in the first quarter of 2010.

Buffett, Berkshire’s CEO, is taking out $8 billion of debt to finance the purchase and risking Berkshire’s AAA credit rating, which Standard & Poor’s has said it may cut. He told the BNSF employees that he won’t sell the railroad’s assets to pay debt and plans to continue investing in the company’s infrastructure.

“It’d be crazy if we didn’t,” Buffett said. “We’re not going to buy a business and starve it.”