Comments on: Fat Pitch Take on Burlington Northern Santa Fe

By: Carnival of Personal Finance #230 – New Site Edition - Canadian Finance Blog

Mon, 09 Nov 2009 10:06:23 +0000

[...] from Fat Pitch Financials presents Fat Pitch Take on Burlington Northern Santa Fe, and says, “Could the Warren Buffett Berkshire Hathaway (BRK-A)acquisition of Burlington [...]

By: David Merkel

David Merkel — Thu, 05 Nov 2009 05:05:38 +0000

This is a simple arb, nothing more. Don’t forget to model the 60/40 proration. There is little optionality here.

By: Sam

Sam — Wed, 04 Nov 2009 16:47:53 +0000

it’s hard to judge the arb play without the details of the stock part of the offer.
for 97.30 (right now) you probably get at least two dividend payments of 0.40, and 100 cash if you want cash.
deal likely done in less than six months, call it eight to be safe. if you get two divs, the deal closes before the third (less than seven months) you make 3.50 on 97.30, just about 3.6% or greater than 7.2% annualized.

not bad, but not great. at $95 it’s an interesting arb for sure.
I’ve got what used to be a 5% position in BNI because I thought it was worth 125 in mid-2007 and 2008. when constant slow growth seemed inevitable and the right of ways are priceless. I’d like to get at least 110, but will probably take Brk shares and put off the taxes depending on the exchange rate.

By: Phil

Phil — Wed, 04 Nov 2009 15:36:21 +0000

Was talking with my wife about this and her savvy opinion is that Buffet is predicting growth in rail shipping coming soon. Does his crystal ball forecast a stirring of the economic bull?