jeaton Not sure about other countries, but the Class 1 US subsidiaries of the CN and CP are wholly owned by a bunch of foreigners. LOL
Not sure about other countries, but the Class 1 US subsidiaries of the CN and CP are wholly owned by a bunch of foreigners. LOL
And just to make the relationship with Canada more complicated, the CN and CP undoubtedly include on their stockholder lists many, if not a majority, of US based individuals, mutual funds and other investment vehicles.
Our economies are so integrated that one could spend a lifetime just attempting to understand all of the relationships. I do wish they would do something about those pesky cold front exports, however.
nanaimo73 Paul_D_North_Jr Today's Wall Street Journal has a shortish article on page C-3 that quotes Matt Rose - BNSF's CEO - as saying and a compnay SEC filing as stating that Berkshire Hathaway will sell off all of its NS and UP shares before completing the purchase of BNSF early next year. - Paul North. Anyone happen to know the level of foriegn ownership allowed in the Class 1 railroads? Would it depend on the country involved? For instance, would a German company be allowed to own a larger share of Union Pacific than a Chinese company?
Paul_D_North_Jr Today's Wall Street Journal has a shortish article on page C-3 that quotes Matt Rose - BNSF's CEO - as saying and a compnay SEC filing as stating that Berkshire Hathaway will sell off all of its NS and UP shares before completing the purchase of BNSF early next year. - Paul North.
Today's Wall Street Journal has a shortish article on page C-3 that quotes Matt Rose - BNSF's CEO - as saying and a compnay SEC filing as stating that Berkshire Hathaway will sell off all of its NS and UP shares before completing the purchase of BNSF early next year.
- Paul North.
Anyone happen to know the level of foriegn ownership allowed in the Class 1 railroads? Would it depend on the country involved? For instance, would a German company be allowed to own a larger share of Union Pacific than a Chinese company?
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
BTW, anyone interested in the blowup of the current financial markets would find the book House of Cards by William Cohan to be a very informative source.
It explores the "tale of hubris and wretched excess on Wall Street." Lessons should always be learned from failures.
ed
There are pros and cons for public and private ownership.
If a railroad is public, the capital equity markets are available, in which stock can be issued to raise capital. Also, majority owners have a much more liquid method of selling their holdings. The cons include public reporting of accounting, the Sarbane Oxley rules (working for a company which is owned by a publicly traded company, I can verify Sarbane Oxley is a very difficult and expensive, but overall is not a bad thing).
By taking a railroad private, a company such as Berkshire Hathaway is basically saying I believe in BNSF and am going to hold this for a very long time. This is much different than a private equity firm or investment firm. Fortress purchased Rail America 2 years ago and loaded it with debt and then recently issued stock. There were two purposes to the stock IPO. One was to raise capital and the other to recoup their investment. A certain percentage went to the company coffers, but quite a bit to Fortress. Now, that is their right as they are the owner (along with the banks), but the long term goals of the railroad are often sacrificed.
There is a very interesting and timely book review in the WSJ today about the Private Equity industry. Generally, the author (The Buyout of America, by Josh Kosman) seems that PE buyouts adds debt, leads to reduction in employees, often the movement of a company to lower cost regions, etc. Obviously Berkshire Hathaway cannot move the railroad.
Further, Buffett and BH have an outstanding long term history of buying and managing companies. There have been some bombs such as Salamon Bros, US Air, and the newspapers are currently not doing so well, but from all indications this has to be positive for BNSF employees and management.
Interestingly, I have a report from Bear Sterns from 3 years ago about the railroad industry, potential buyout and selling prices, and other info on the industry. The report is over 300 pages and is interesting for a couple of reasons. One...this report was issued near the top of the PE bubble and made it clear that it was possible to buyout a railroad. Two...Bear Sterns is now gone, a victom of the debt bubble that it pushed so hard. Three...BNSF, DME, and Rail America are all in the cycle.
One must remember that BH probably will not issue debt to finance BNSF. They dont have to in order to use OPM (other people's money)...they use the float off of their enormous insurance holdings. Buffett has often said that float is an amazing thing, it is like an interest free loan.
For those of you interested in finance and investing, reading the BH annual reports is much like RWM explaining the railroad industry. Entertaining, well written, and very informative.
Perhaps RWM is Warren Buffett....
rstaller I don't like the idea of Buffet owning BNSF entirely. Look at the trouble CSX has had with their investor, Children's Fund or whatever it's called. Diverse ownership keeps corporate raiders from raping companies and walking. I would hope BNSF employees wise up quickly and start taking any legal steps needed to protect their interests in the company. Also if Bill Gates, decides to buy, oh lest say for the sake of argument, NS, then decides to sell it to Buffet, no permission is needed from the goverment, as it is not a merger, but a privately company being sold by one individual to another. WISE UP PEOPLE. R. Staller
I don't like the idea of Buffet owning BNSF entirely. Look at the trouble CSX has had with their investor, Children's Fund or whatever it's called. Diverse ownership keeps corporate raiders from raping companies and walking. I would hope BNSF employees wise up quickly and start taking any legal steps needed to protect their interests in the company. Also if Bill Gates, decides to buy, oh lest say for the sake of argument, NS, then decides to sell it to Buffet, no permission is needed from the goverment, as it is not a merger, but a privately company being sold by one individual to another. WISE UP PEOPLE. R. Staller
Not so fast--
I think it is a little unfair to characterize sole ownership of a company as one of a 'T. Boone Pickens' sort. I've worked in companies that were sole ownership and did not find them to be ripping people off as much as ---say---some that we have read about in the not so recent past. Remember Enron? Adelphia? 3Com? etc---etc---all fine stockholder--diverse owned corporations.
Wherever humans are you will find a human who will be a Gordon Gecko sort. And from what I've seen of Berkshire Hathaway's operations they don't seem to interfere with much---
Any argument carried far enough will end up in Semantics--Hartz's law of rhetoric Emerald. Leemer and Southern The route of the Sceptre Express Barry
I just started my blog site...more stuff to come...
http://modeltrainswithmusic.blogspot.ca/
beaulieu One correction the Kansas City Southern is one of the seven Class I railroads in the United States. The other six are Burlington Northern Santa Fe Union Pacific Norfolk Southern CSX Soo Line Corp. Grand Trunk Corp.
One correction the Kansas City Southern is one of the seven Class I railroads in the United States. The other six are
Burlington Northern Santa Fe
Union Pacific
Norfolk Southern
CSX
Soo Line Corp.
Grand Trunk Corp.
Grand Trunk Corp is the US subsidiary of Canadian National
Soo Line Corp is the US subsidiary of Canadian Pacific
Kansas City Southern is the seventh US Class 1 railroad.
Mike
beaulieuLooshiAs I discussed earlier today on my blog I don't see this deal creating another round of mergers. The status quo is very stable and I don't see big changes happening until that balance of power is upset. Is Buffet buying BNSF enough to change this? I don't think so. As far as we know at this time there will be little change in the day to day operation of the railroad and current management isn't going anywhere.Combine that with the fact that the current political climate is very hostile to mergers and I don't think you will be seeing two mega-railroads in America anytime soon. Nice looking Blog. One correction the Kansas City Southern is one of the seven Class I railroads in the United States. The other six areBurlington Northern Santa FeUnion PacificNorfolk SouthernCSXSoo Line Corp.Grand Trunk Corp.
LooshiAs I discussed earlier today on my blog I don't see this deal creating another round of mergers. The status quo is very stable and I don't see big changes happening until that balance of power is upset. Is Buffet buying BNSF enough to change this? I don't think so. As far as we know at this time there will be little change in the day to day operation of the railroad and current management isn't going anywhere.Combine that with the fact that the current political climate is very hostile to mergers and I don't think you will be seeing two mega-railroads in America anytime soon.
As I discussed earlier today on my blog I don't see this deal creating another round of mergers. The status quo is very stable and I don't see big changes happening until that balance of power is upset. Is Buffet buying BNSF enough to change this? I don't think so. As far as we know at this time there will be little change in the day to day operation of the railroad and current management isn't going anywhere.
Combine that with the fact that the current political climate is very hostile to mergers and I don't think you will be seeing two mega-railroads in America anytime soon.
Nice looking Blog. One correction the Kansas City Southern is one of the seven Class I railroads in the United States. The other six are
Thank you for the correction. Has KCS always been that big? I know the definition of Class 1 is somewhat arbitrary and has changed over time but I've only been following railroads seriously for the last few years (I'm 19).
CMStPnPbeaulieu Soo Line Corp. Grand Trunk Corp. Soo Line is Canadian Pacific now I thought Grand Trunk is Candian National now I thought
beaulieu Soo Line Corp. Grand Trunk Corp.
Soo Line is Canadian Pacific now I thought
Grand Trunk is Candian National now I thought
The railroad subsidiaries of Soo Line Corp. and Grand Trunk Corp. have agreements with their parent Corporations (Canadian Pacific and Canadian National respectively) to conduct business under the parent Corporations name( a d/b/a or "Doing Business As" agreement), the subsidiaries and their subsidiaries retain their distinct names and are referred to as such for all regulatory and financial matters. A separate subsidiary is required for each Canadian company, and that subsidiary must have all the necessary assets on its books to function as a railroad ( locomotives, freight cars,employees, rail and other ROW items, plus a Headquarters in the US) For example the Soo Line Corp. is subject to STB and IRS oversight, while the rest of Canadian Pacific is not. So if you ship a carload of steel from Edmonton to St. Paul with CP as the only carrier, to the shipper it looks like just one carrier, but internally CP will book an interchange between parent CP and subsidiary Soo Line RR, just the same as if it went to BNSF instead.
Canadian Pacific directly owns Soo Line Corp, a Minnesota Corporation, and recognized by the STB as a Class I railroad.
In turn Soo Line Corp owns the following;
Soo Line Railroad
Delaware and Hudson Railroad
Dakota, Minnesota & Eastern Railroad
49% interest in the Indiana Harbor Belt RR.
some percentage of the Belt Railway of Chicago
rstaller RMW the key word in your response section 1, is corporation. If an individual buys XYZ rr and holds it as a private company, he need not incorporate. and therein lies the out. R. Staller
RMW the key word in your response section 1, is corporation. If an individual buys XYZ rr and holds it as a private company, he need not incorporate. and therein lies the out. R. Staller
It may or may not provide an out, but clearly your supposition doesn't apply in this case since BNSF was bought by Berkshire Hathaway Inc. which is a Delaware Corporation.
It is my understanding that currently a company can be one of five types, a sole proprietorship, a partnership, a Limited Liability Co. (LLC), a S- Corporation, or a C- Corporation. My own business is a S-Corporation.
rstaller you may want to look up what happened when Santa Fe Pacific Inc. wanted to merge the Southern Pacific and AT&SF railroads. Mr. John Schmidt the Chairman of the Corporation didn't think the STB could say no either. The independent Board members consulted a top Washington law firm for advice and they quickly decided to have Mr. Schmidt shown the door, when he refused to take a no answer from the STB.
Interesting article on the BNSF purchase in today's NY Times:
http://www.nytimes.com/2009/11/08/weekinreview/08barry.html
john_edwards RWM, you are not the only one being entertained in this thread');" title="Laugh - ">
RWM, you are not the only one being entertained in this thread');" title="Laugh - ">
He-he-he-he. I like the Berkshire Hathaway = 1 person. Also I think legally because of it's size, it can be argued.......BNSF = Public Utility. I know thats one reason Texas has a Railroad Commission.
When I heard the news, I was pleased. No, I didn't buy BNI at $16 (6 years ago), nor did I buy it at $116 (two years ago). I am awaiting news about the conversion. At this point, I am leaning towards converting it to BRK/B shares. Time will tell.
As far as future mergers go, I would bet on CN taking over KCS. It is a 'good fit', unless CPR gets into the act. CP got 'burned' by the NIMBYs on the DM&E takeover. CN did much better with the EJ&J thingie. "We live in interesting times". Dunno who said that, but it is true.
UPReading85 [The more interesting issue for the industry, and which probably requires a separate thread is whether or not this sparks the last great round of mergers. It is clearly a non-traditional rail merger in that it is about capitalization and not geography, but I would still think UP is a little nervous about it.
[The more interesting issue for the industry, and which probably requires a separate thread is whether or not this sparks the last great round of mergers. It is clearly a non-traditional rail merger in that it is about capitalization and not geography, but I would still think UP is a little nervous about it.
When I heard the news I started considering that. However, this transaction is so different than the historical pattern in the industry that I think that it makes it unlikely that the purchase will be the cause of a last great round of mergers. I also have doubts that the current political climate would permit a combination of any of the big 6 roads.
I don't know about whether or not Bershire Hathaway's purchase will bring about mergers...however it has give me, and probably other investors, pause for thought. I don't own any shares in BNSF..but I do have a sizable portion of my retirement savings invested in rail stock. I've been happy with my investment..even enjoy reading the reports...but now I'm looking at other investments. I will probably sell my shares and invest the money in my own business. I like that idea because I run the busines..its mine lock, stock, and barrell...and I therefore have more control in how my investment appreciates over time. I'm 47 years old and don't want my retirement savings to be sidelined because some billionaire (institional or indivual) wants to buy the company.
UPReading85 Murphy SidingWhat exactly are the odds, of one person owning one $44 Billion Class 1 railroad, let alone two? About 1 in 88 billion? Good point, but it is not exactly $44 billion out of pocket. Since Berkshire already owns 22.6pc of BNSF's stock, the total out of pocket cash is $26 billion, with an agreement to take on to Berkshire's books $10 billion of BNSF debt. Since only 60pc of the payout to existing shareholders will be cash, the overall outlay is more on the order of $15-17billion.
Murphy SidingWhat exactly are the odds, of one person owning one $44 Billion Class 1 railroad, let alone two? About 1 in 88 billion?
Good point, but it is not exactly $44 billion out of pocket. Since Berkshire already owns 22.6pc of BNSF's stock, the total out of pocket cash is $26 billion, with an agreement to take on to Berkshire's books $10 billion of BNSF debt. Since only 60pc of the payout to existing shareholders will be cash, the overall outlay is more on the order of $15-17billion.
Thanks to Chris / CopCarSS for my avatar.
Good point, but it is not exactly $44 billion out of pocket. Since Berkshire already owns 22.6pc of BNSF's stock, the total out of pocket cash is $26 billion, with an agreement to take on to Berkshire's books $10 billion of BNSF debt. Since only 60pc of the payout to existing shareholders will be cash, the overall outlay is more on the order of $15-17billion.The more interesting issue for the industry, and which probably requires a separate thread is whether or not this sparks the last great round of mergers. It is clearly a non-traditional rail merger in that it is about capitalization and not geography, but I would still think UP is a little nervous about it.
rstaller Correct, a supplier has the right to demand proof of financial capability, government has the right to inspect for safety or enviormental issues. If you want an operational loan from a bank, again financial responsibility must be established. RMW the key word inyour response section 1, is corporation. If an individual buys XYZ rr and holds it as a private company, he need not incorporate. and therein lies the out. R. Staller
Correct, a supplier has the right to demand proof of financial capability, government has the right to inspect for safety or enviormental issues. If you want an operational loan from a bank, again financial responsibility must be established.
RMW the key word inyour response section 1, is corporation. If an individual buys XYZ rr and holds it as a private company, he need not incorporate. and therein lies the out. R. Staller
If you're comfortable with that interpretation of the law, it is OK by me. It is not my business or desire to argue on my own time. I just come here for fun. I am at your service if I can help you in any way.
RWM
rstaller WRONG!!!!!!!!!! If both companies are no longer publically traded, but privately owned, no okay by the STB is needed. Privately owned companies,( not stocked traded publically) are not subject to the same sales laws. Once the companies are removed from the stock exchange they are not open to public scrutiny, that's why privately owned companies do not have to publically report earnings, except to the IRS for taxing purposes. Go to a person who owns a company, and demand to see his books, and he has every right, and is protected by commerce law, and basically can tell you to go pound salt. R. Staller
WRONG!!!!!!!!!! If both companies are no longer publically traded, but privately owned, no okay by the STB is needed. Privately owned companies,( not stocked traded publically) are not subject to the same sales laws. Once the companies are removed from the stock exchange they are not open to public scrutiny, that's why privately owned companies do not have to publically report earnings, except to the IRS for taxing purposes. Go to a person who owns a company, and demand to see his books, and he has every right, and is protected by commerce law, and basically can tell you to go pound salt. R. Staller
A private company is not open to AS MUCH public scrutiny perhaps...however any business regardless of ownership is a social organ and is thus open to some scrutiny by others. For example, my own business is 100% private...however the law allows that a supplier may request to see my books in certain cases. The law also allows safety and environmental audits..employment audits..around here my workforce needs to reflect the cultural diversity of the population at large..if it does not then I've got a big problem even though my business is privately held. Also, if I want to do business with a bank or maybe some of the larger name brand customers then once again I will need to be free to open my books...some big accounts require full disclosure..they want to know who my customers are..what I'm charging them..who my suppliers are..all in some detail. Private ownership is a good thing..don't get me wrong...but from a practical standpoint it makes no sense to play it too close to the vest.
BNSFwatcher Well, you were off only $10 billion; " The valuation of BNSF Railway NYSE: BNI) was $34 billion on 02 Nov 2009. Berkshire Hathaway already owned about 22% of BNI, making the deal $26.3 billion for the un-owned shares. Not enough to bail out Newark, or Detroit, or Chicago, but a lot of money, in my book. Hays
Well, you were off only $10 billion; " The valuation of BNSF Railway NYSE: BNI) was $34 billion on 02 Nov 2009. Berkshire Hathaway already owned about 22% of BNI, making the deal $26.3 billion for the un-owned shares. Not enough to bail out Newark, or Detroit, or Chicago, but a lot of money, in my book.
Hays
Most financial sources put the value of the deal at $44 billion, not $26.3 billion, as BH also assumed $10 billion in debt and already held $8 billion in stock, so, in effect, BH is on the hook for $44 billion.
See, for example,
http://dealbook.blogs.nytimes.com/2009/11/03/berkshire-to-buy-rest-of-burlington-northern-for-44-billion/
http://www.joc.com/node/414432
http://www.streetinsider.com/Mergers+and+Acquisitions/Buffett+Takes+A+Ride+On+the+Burlington+Northern+%28BNI%29+Railroad,+Announces+$44+Billion+Takeover/5068609.html
rstallerWRONG!!!!!!!!!! If both companies are no longer publically traded, but privately owned, no okay by the STB is needed. Privately owned companies,( not stocked traded publically) are not subject to the same sales laws. Once the companies are removed from the stock exchange they are not open to public scrutiny, that's why privately owned companies do not have to publically report earnings, except to the IRS for taxing purposes. Go to a person who owns a company, and demand to see his books, and he has every right, and is protected by commerce law, and basically can tell you to go pound salt. R. Staller
I don't know about other companies, but I do know a little about the jurisdiction of the STB. Here's the relevant section of Public Law 104-88, the ICC Termination Act of 1995:
‘‘§ 11323. Consolidation, merger, and acquisition of control‘‘(a) The following transactions involving rail carriers providingtransportation subject to the jurisdiction of the Board under thispart may be carried out only with the approval and authorizationof the Board:‘‘(1) Consolidation or merger of the properties or franchisesof at least 2 rail carriers into one corporation for the ownership,management, and operation of the previously separately ownedproperties.‘‘(2) A purchase, lease, or contract to operate property ofanother rail carrier by any number of rail carriers.‘‘(3) Acquisition of control of a rail carrier by any numberof rail carriers.‘‘(4) Acquisition of control of at least 2 rail carriers bya person that is not a rail carrier.‘‘(5) Acquisition of control of a rail carrier by a personthat is not a rail carrier but that controls any number ofrail carriers.‘‘(6) Acquisition by a rail carrier of trackage rights over,or joint ownership in or joint use of, a railroad line (andterminals incidental to it) owned or operated by another railcarrier.‘‘(b) A person may carry out a transaction referred to in subsection(a) of this section or participate in achieving the controlor management, including the power to exercise control or management,in a common interest of more than one of those rail carriers,regardless of how that result is reached, only with the approvaland authorization of the Board under this subchapter. In additionto other transactions, each of the following transactions are consideredachievements of control or management:‘‘(1) A transaction by a rail carrier that has the effectof putting that rail carrier and person affiliated with it, takentogether, in control of another rail carrier.‘‘(2) A transaction by a person affiliated with a rail carrierthat has the effect of putting that rail carrier and personsaffiliated with it, taken together, in control of another railcarrier.‘‘(3) A transaction by at least 2 persons acting together(one of whom is a rail carrier or is affiliated with a rail carrier)that has the effect of putting those persons and rail carriersand persons affiliated with any of them, or with any of thoseaffiliated rail carriers, taken together, in control of anotherrail carrier.‘‘(c) A person is affiliated with a rail carrier under this subchapterif, because of the relationship between that person anda rail carrier, it is reasonable to believe that the affairs of anotherrail carrier, control of which may be acquired by that person,will be managed in the interest of the other rail carrier.
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