BURLINGTON NTH SANTA FE (BNI) 98.10 $0.02 (0.02%) 10:38PM (15 mins delay)

Complex Motives Behind Buffett's Burlington Northern Buy

Nov 06, 2009 - 5:48 AM EST

Greg Feirman submits:

Some analysts have been puzzling over the high price Buffett agreed to pay for Burlington Northern Santa Fe (BNI). He paid $100 a share for a company that has earned $5.38 over the last 12 months for a trailing multiple of 18.6. Book value is $36 a share.

Buffett himself admitted that he stretched to make this deal: “I stretched on this one. I went to the last nickel,” he said in an interview. What explains the deal, then, is not valuation but more complex motives relating to Buffett’s age and legacy.

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Source: Seeking Alpha (Nov 06, 2009 - 5:48 AM EST)