The Scoop
BNSF, the railroad giant owned by Warren Buffett’s Berkshire Hathaway, is working with Goldman Sachs to explore a takeover of a rival, according to people familiar with the matter.
Its interest comes as its chief rival, Union Pacific, pursues a takeover of Norfolk Southern, Semafor reported Thursday, which would create the country’s only coast-to-coast railroad and leave BNSF at a disadvantage. (Both Union Pacific and Berkshire are headquartered in Omaha, Nebraska.)
BNSF recently hired bankers from Goldman, which four years ago helped broker the industry’s last big merger, between Canadian Pacific and Kansas City Southern. It wasn’t immediately clear whether BNSF has its eye on Norfolk or the other East Coast carrier, CSX. But its interest would set off a free-for-all among large railroads and pose a test of the Trump administration’s enthusiasm for industrial consolidation.
A spokesperson for BSNF, which was acquired by Berkshire in 2010, did not respond to a request for comment. A spokesperson for Goldman Sachs declined to comment.
Know More
On paper, Norfolk Southern is a better fit for BNSF, which has underperformed its rival Class I railroads over the last few years. Both companies have a healthy share of intermodal transport (handing off goods to trucking companies) and their networks fit more neatly into each other, according to industry analysts and investors.
Similarly, CSX and Union Pacific have more complementary tracks. But Union Pacific CEO Jim Vena doesn’t see CSX as open to a deal, Semafor has previously reported. That was one of the factors that has narrowed Union Pacific’s discussions with Norfolk, which are early but active.
Step Back
Berkshire Hathaway is sitting on a $347 billion cash pile, so could afford to pay up for Norfolk ($62 billion) or CSX ($65 billion). But Buffett, who will step back as CEO later this year, has historically bought best-in-class businesses and let them be, rather than growing them through subsequent acquisitions.
The outlier is another industrial business overseen, as BNSF is, by Buffett’s successor, Greg Abel. Berkshire Hathaway Energy has bought out joint-venture partners and has even gotten into bidding wars for assets.