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As filed with the Securities and Exchange Commission on November 25, 2009

Registration No. 333-                    

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

BERKSHIRE HATHAWAY INC.

(Exact name of registrant as specified in its charter)

 

Delaware		6331		47-0813844
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

 

 

3555 Farnam Street, Omaha, Nebraska 68131

(402) 346-1400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Marc D. Hamburg

Senior Vice President and Chief Financial Officer

3555 Farnam Street, Omaha, Nebraska 68131

(402) 346-1400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Robert E. Denham Munger, Tolles & Olson LLP 355 South Grand Avenue 35th Floor Los Angeles, California 90071 (213) 683-9100		Roger Nober Burlington Northern Santa Fe Corporation Executive Vice President Law and Secretary 2650 Lou Menk Drive Fort Worth, Texas 76131 (800) 795-2673		Scott A. Barshay Cravath, Swaine & Moore LLP Worldwide Plaza 825 Eighth Avenue New York, New York 10019 (212) 474-1000

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the merger agreement described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  x		Accelerated filer  ¨		Non-accelerated filer  ¨		Smaller reporting company  ¨
				(Do not check if a smaller reporting company)

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered(1)		Amount to be Registered(2)		Proposed Maximum Offering Price Per Unit		Proposed Maximum Aggregate Offering Price		Amount of Registration Fee(4)
Class A Common Stock		—		N/A		$10,575,896,832(3)		$590,135
Class B Common Stock		—		N/A		(3)		—

(1)

This Registration Statement relates to Class A Common Stock and Class B Common Stock of the registrant issuable to holders of Common Stock (“BNSF common stock”) of Burlington Northern Santa Fe Corporation, a Delaware corporation (“BNSF”), pursuant to the Agreement and Plan of Merger, dated as of November 2, 2009, by and among the registrant, R Acquisition Company, LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of the registrant, and BNSF (the “Merger Agreement”).

 

(2)	Omitted in reliance on Rule 457(o) of the Securities Act of 1933.

 

(3)

Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act of 1933 and computed pursuant to Rule 457(c) and 457(f) of the Securities Act of 1933. The proposed maximum offering price is equal to the product of (a) $98.10, the average of the high and low prices per share of the common stock of BNSF as reported on the New York Stock Exchange composite transactions reporting system on November 19, 2009 and (b) the maximum possible number of shares of BNSF common stock which may be converted into shares of the registrant’s Class A Common Stock and Class B Common Stock pursuant to the Merger Agreement (calculated as 277,582,594, which includes (i) the 340,522,033 issued and outstanding shares of BNSF common stock as of November 1, 2009, plus (ii) the 13,837,590 shares of BNSF common stock issuable pursuant to outstanding stock options and various restricted stock units, minus (iii) the 76,777,029 shares of BNSF common stock already owned by the registrant and its subsidiaries), less $16,654,955,640, which is the maximum possible amount of the merger consideration to be paid in cash. The foregoing calculation assumes that the average of the daily volume-weighted average trading prices per share of the registrant’s Class A Common Stock over the ten trading day period ending on the second full trading day prior to completion of the merger is between $79,777.34 and $124,652.09.

 

(4)	Computed in accordance with Section 6(b) of the Securities Act of 1933 by multiplying 0.0000558 by the proposed maximum aggregate offering price.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

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THE INFORMATION CONTAINED IN THIS PRELIMINARY PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

 

PRELIMINARY PROXY STATEMENT/PROSPECTUS

SUBJECT TO COMPLETION, DATED NOVEMBER 25, 2009

Dear Fellow Stockholder:

You are cordially invited to attend a special meeting of the stockholders of Burlington Northern Santa Fe Corporation (“BNSF”) to be held on [—],[—], at [—], local time, at [—].

At the special meeting, you will be asked to approve the Agreement and Plan of Merger, dated as of November 2, 2009 (the “merger agreement”), by and among Berkshire Hathaway Inc. (“Berkshire”), R Acquisition Company, LLC, an indirect wholly owned subsidiary of Berkshire (“Merger Sub”), and BNSF, pursuant to which BNSF will be merged with and into Merger Sub and Merger Sub will continue as the surviving entity. Following the merger, Merger Sub will change its name to “Burlington Northern Santa Fe, LLC” and will remain an indirect wholly owned subsidiary of Berkshire.

If the merger is completed, each of your shares of BNSF common stock will be converted into the right to receive, at your election (subject to the proration and reallocation procedures described in this proxy statement/prospectus), either (i) $100.00 in cash, without interest, or (ii) a portion of a share of Berkshire Class A common stock equal to the exchange ratio, which is calculated by dividing $100.00 by the average of the daily volume-weighted average trading prices per share of Berkshire Class A common stock over the ten trading day period ending on the second full trading day prior to completion of the merger (the “Class A average trading value”); provided, however, that if the Class A average trading value is above $124,652.09 or below $79,777.34, then the exchange ratio will be fixed at 0.000802233 or 0.001253489, as the case may be. Fractional shares of Berkshire Class A common stock will not be issued in the merger. Instead, shares of Berkshire Class B common stock will be issued in lieu of any fractional shares of Berkshire Class A common stock and cash will be paid in lieu of any fractional shares of Berkshire Class B common stock. To facilitate the merger and related transactions, Berkshire is seeking stockholder approval to effect a 50-for-1 stock split with respect to its Class B common stock. Shares of Berkshire Class A and Class B common stock are listed on the New York Stock Exchange under the stock symbols “BRK.A” and “BRK.B,” respectively.

Under the merger agreement, approximately 60% of the total merger consideration payable by Berkshire to BNSF stockholders will be in the form of cash and approximately 40% will be in the form of Berkshire common stock. Accordingly, the cash and stock elections that you make with respect to your shares may be subject to proration and reallocation so as to achieve as closely as practicable this 60/40 cash-stock split.

This proxy statement/prospectus provides a detailed description of the merger agreement and the proposed merger. In addition, it contains important information regarding the special meeting. We urge you to read this proxy statement/prospectus (and any documents incorporated into this proxy statement/prospectus by reference) carefully. Please pay particular attention to the section titled “Risk Factors” beginning on page 26.

The Board of Directors of BNSF unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement.

The merger cannot be completed unless it is approved by (i) the holders of at least 66- ²/3% of the issued and outstanding shares of BNSF common stock not owned by Berkshire or any of its affiliates or associates and (ii) the holders of a majority of the issued and outstanding shares of BNSF common stock.

Your vote is very important. If you are a registered stockholder, please vote your shares as soon as possible using one of the following methods to ensure that your vote is counted, regardless of whether you expect to attend the special meeting in person: (1) call the toll-free number specified on the enclosed proxy card and follow the instructions when prompted, (2) access the Internet website specified on the enclosed proxy card and follow the instructions provided to you, or (3) complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name” through a

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bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the special meeting. A failure to vote your shares is the equivalent of a vote “AGAINST” the merger.

If you have any questions about the proposed merger or about how to vote your shares, please call Innisfree M&A Incorporated, the firm assisting BNSF in its solicitation of proxies, toll-free at (877) 456-3463, or call BNSF Investor Relations at (817) 352-6452. For media inquiries, please call BNSF Corporate Relations at (817) 867-6407.

We hope to see you at the special meeting in [—] on [—] and look forward to the successful completion of the merger.

Sincerely,

Matthew K. Rose

Chairman, President and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement/prospectus or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated [—] and is first being mailed to the stockholders of BNSF on or about [—].

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ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about BNSF and Berkshire from other documents that are not included in or delivered with this proxy statement/prospectus. This information is available for you to review at the public reference room of the Securities and Exchange Commission (the “SEC”) located at 100 F Street, N.E., Washington, D.C. 20549, and through the SEC’s website at www.sec.gov. You can also obtain the documents incorporated by reference into this proxy statement/prospectus free of charge by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

Burlington Northern Santa Fe Corporation 2650 Lou Menk Drive Fort Worth, Texas 76131 (817) 352-6452 Attention: Investor Relations		Berkshire Hathaway Inc. 3555 Farnam Street Omaha, Nebraska 68131 (402) 346-1400 Attention: Corporate Secretary

or

Innisfree M&A Incorporated

501 Madison Avenue

20^th Floor

New York, New York 10022

Toll-Free (877) 456-3463

If you would like to request any documents, please do so by [—] in order to receive them before the special meeting.

You also may obtain additional proxy cards and other information related to the proxy solicitation by contacting the appropriate contact listed above. You will not be charged for any of these documents that you request.

For more information, please see the section titled “Where To Find More Information” beginning on page 116.

ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Berkshire, constitutes a prospectus of Berkshire under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of Berkshire Class A and Class B common stock to be issued to BNSF stockholders under the merger agreement. This document also constitutes a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to the special meeting of BNSF stockholders, at which meeting BNSF stockholders will be asked to vote upon a proposal to adopt the merger agreement.

You should rely only on the information contained or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated as of [— ]. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of such incorporated document. Neither our mailing of this proxy statement/prospectus to BNSF stockholders nor the issuance by Berkshire of its common stock in connection with the merger will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this proxy statement/prospectus regarding BNSF has been provided by BNSF and information contained in this proxy statement/prospectus regarding Berkshire has been provided by Berkshire.

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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF

BURLINGTON NORTHERN SANTA FE CORPORATION

A special meeting of stockholders of Burlington Northern Santa Fe Corporation (“BNSF”) will be held on [—], [—] at [—], local time, at [—], for the following purposes:

 

•

to adopt the Agreement and Plan of Merger, dated as of November 2, 2009, by and among Berkshire Hathaway Inc. (“Berkshire”), R Acquisition Company, LLC, an indirect wholly owned subsidiary of Berkshire (“Merger Sub”), and BNSF, pursuant to which BNSF will be merged with and into Merger Sub and Merger Sub will continue as the surviving entity, as further described in the accompanying proxy statement/prospectus; and

 

•

to transact any other business that may properly be brought before the special meeting, or any adjournments or postponements thereof, including, without limitation, a motion to adjourn or postpone the special meeting to another time and/or place for the purpose of soliciting additional proxies in favor of the proposal to adopt the merger agreement, if necessary.

The Board of Directors of BNSF unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement.

Adoption of the merger agreement requires the vote of (i) holders of at least 66- ²/3% of the issued and outstanding shares of BNSF common stock not owned by Berkshire or any of its affiliates or associates and (ii) holders of a majority of the issued and outstanding shares of BNSF common stock.

Only stockholders of record at the close of business on [—] are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. A complete list of stockholders entitled to vote at the special meeting will be available for a period of ten days prior to the special meeting at the offices of BNSF, located at 2650 Lou Menk Drive, Fort Worth, Texas 76131, for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting. The stockholder list will also be available at the special meeting for examination by any stockholder present at the special meeting.

Only stockholders or their proxy holders may attend the special meeting. If you hold shares in your name, please be prepared to provide proper identification, such as a driver’s license. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to provide proof of ownership, such as a recent account statement or letter from your bank, broker or other nominee, along with proper identification.

Your vote is very important. If you are a registered stockholder, please vote your shares as soon as possible using one of the following methods to ensure that your vote is counted, regardless of whether you expect to attend the special meeting in person: (1) call the toll-free number specified on the enclosed proxy card and follow the instructions when prompted, (2) access the Internet website specified on the enclosed proxy card and follow the instructions provided to you, or (3) complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the special meeting. A failure to vote your shares is equivalent to a vote “AGAINST” the merger.

Your proxy may be revoked at any time before the vote at the special meeting by following the procedures outlined in the accompanying proxy statement/prospectus.

In connection with our solicitation of proxies for the special meeting, we are making available this proxy statement/prospectus and proxy card on or about [—].

By order of the Board of Directors.

Roger Nober

Executive Vice President Law and Secretary

2650 Lou Menk Drive

Fort Worth, Texas 76131

[—], 2009

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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS		1
SUMMARY		9
The Companies		9
The Merger		9
Merger Consideration		9
Treatment of BNSF Equity Compensation Awards		10
Risk Factors		10
Special Meeting of BNSF Stockholders		11
Recommendation of the BNSF Board and its Reasons for the Merger		11
Opinions of BNSF’s Financial Advisors		11
Interests of BNSF Directors and Executive Officers in the Merger		12
NYSE Listing of Berkshire Class A and Class B Common Stock		12
Delisting and Deregistration of BNSF Common Stock		12
Regulatory Approvals Required for the Merger		13
Appraisal Rights		13
Conditions to the Merger		14
Expected Timing of the Merger		15
No Solicitations of Other Offers		15
Termination of the Merger Agreement		15
Termination Fee		16
Material U.S. Federal Income Tax Consequences of the Merger		16
Accounting Treatment		17
Comparative Rights of Stockholders		17
Litigation		17
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BERKSHIRE		18
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BNSF		20
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA		22
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA		24
COMPARATIVE PER SHARE MARKET PRICE DATA		25
RISK FACTORS		26
FORWARD-LOOKING STATEMENTS		30
SPECIAL MEETING OF BNSF STOCKHOLDERS		31
General Information		31
Date, Time and Place of Special Meeting		31
Purpose of Special Meeting		31
Recommendation of the BNSF Board		31
Required Vote		31
Record Date; Voting		31
Quorum		32
Abstentions and Broker Non-Votes		32
Voting at the Special Meeting		32
Revocation of Proxies		33
Voting Shares Held Through BNSF’s 401(k) Plans		34
Voting Shares Held in BNSF’s Dividend Reinvestment Plan		34
Other Business		34

 

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Adjournments and Postponements		34
Solicitation of Proxies		34
THE MERGER		36
Background of the Merger		36
Recommendation of the BNSF Board and its Reasons for the Merger		40
Management Cases		42
Berkshire’s Reasons for the Merger		43
Opinions of BNSF’s Financial Advisors		43
Interests of BNSF Directors and Executive Officers in the Merger		63
Regulatory Approvals Required for the Merger		68
Appraisal Rights		69
NYSE Listing of Berkshire Class A and Class B Common Stock		73
Delisting and Deregistration of BNSF Common Stock		73
Litigation		73
THE MERGER AGREEMENT		75
The Merger		75
Merger Consideration		75
Stockholder Elections		77
Payment of the Merger Consideration		77
Treatment of BNSF Equity Compensation Awards		78
Officers		79
Representations and Warranties		79
Conduct of Business Pending the Merger		80
Efforts to Complete the Merger		82
Indemnification		82
Conditions to the Merger		83
No Solicitations of Other Offers		84
Termination of the Merger Agreement		86
Termination Fee		87
Employee Benefits		88
Amendment, Extension and Waiver		88
ACCOUNTING TREATMENT		89
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER		90
General		90
Tax Consequences of the Merger Generally		90
Tax Consequences of the Merger for Berkshire, Berkshire Stockholders and BNSF		91
Tax Consequences of the Merger for U.S. Holders of BNSF Common Stock		91
Cash in Lieu of Fractional Shares of Berkshire Common Stock		92
Information Reporting and Backup Withholding		93
Reporting Requirements		93
THE COMPANIES		94
Berkshire Hathaway Inc. and R Acquisition Company, LLC		94
Burlington Northern Santa Fe Corporation		95
COMPARATIVE RIGHTS OF STOCKHOLDERS		96
General		96
Certain Differences Between the Rights of Berkshire and BNSF Stockholders		96
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION		102

 

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SUBMISSION OF BNSF STOCKHOLDER PROPOSALS		115
LEGAL MATTERS		115
EXPERTS		115
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		115
WHERE TO FIND MORE INFORMATION		116
Annex A—Merger Agreement		A-1
Annex B—Section 262 of the Delaware General Corporation Law		B-1
Annex C—Opinion of Goldman, Sachs & Co.		C-1
Annex D—Opinion of Evercore Group L.L.C.		D-1

 

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QUESTIONS AND ANSWERS

Set forth below are commonly asked questions and answers about the merger and the special meeting of BNSF stockholders called in connection therewith. For a more complete description of the legal and other terms of the merger, please read carefully this entire proxy statement/prospectus, including the merger agreement attached as Annex A to this proxy statement/prospectus, and the documents incorporated by reference herein. You may obtain a list of the documents incorporated by reference into this proxy statement/prospectus in the section titled “Where To Find More Information” beginning on page 116.

Questions About the Merger

 

Q:	Why am I receiving this document?

 

A:	Berkshire has agreed to acquire BNSF pursuant to the terms of a merger agreement that is described in this proxy statement/prospectus. A copy of the merger agreement is attached to this proxy statement/prospectus as Annex A.

In order to complete the merger, BNSF stockholders must vote to adopt the merger agreement. BNSF is holding a special meeting of stockholders to obtain this stockholder approval.

This proxy statement/prospectus contains important information about the merger and the special meeting of the stockholders of BNSF, and you should read it carefully. The enclosed voting materials allow you to vote your shares without attending the special meeting in person.

Your vote is extremely important. We encourage you to vote as soon as possible. For more information on how to vote your shares, please see the section titled “Special Meeting of BNSF Stockholders” beginning on page 31.

 

Q:	What vote is required to adopt the merger agreement?

 

A:	Under Delaware law, the merger agreement must be adopted by:

 

•

the holders of at least 66- 2/ 3% of the issued and outstanding shares of BNSF common stock not owned by Berkshire or any of its affiliates or associates; and

 

•

the holders of a majority of the issued and outstanding shares of BNSF common stock.

If these votes are not obtained, the merger will not be completed.

 

Q:	What will happen in the merger?

 

A:

In the merger, BNSF will merge with and into Merger Sub, an indirect wholly owned subsidiary of Berkshire. Following the merger, Merger Sub will continue as the surviving entity and will remain an indirect wholly owned subsidiary of Berkshire. Merger Sub will change its name to “Burlington Northern Santa Fe, LLC” upon consummation of the merger. For more information, please see the sections titled “The Merger” and “The Merger Agreement” beginning on pages 36 and 75, respectively.

 

Q:	What will BNSF stockholders receive in the merger?

 

A:

In the merger, each share of BNSF common stock (other than certain restricted shares, shares owned by Berkshire, BNSF or any of their respective subsidiaries, or shares in respect of which appraisal rights have been properly exercised and not withdrawn) will be converted into the right to receive, at the election of the stockholder (subject to the proration and reallocation procedures described below), either (i) $100.00 in cash, without interest, or (ii) a portion of a share of Berkshire Class A common stock equal to the exchange ratio, which is calculated by dividing $100.00 by the average of the daily volume-weighted average trading prices per share of Berkshire Class A common stock over the ten trading day period ending on the second

 

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full trading day prior to completion of the merger (the “Class A average trading value”); provided, however, that if the Class A average trading value is above or below the “collar” (as described below), then the exchange ratio will be fixed at 0.000802233 or 0.001253489, as the case may be. Fractional shares of Berkshire Class A common stock will not be issued in the merger. Instead, shares of Berkshire Class B common stock will be issued in lieu of any fractional shares of Berkshire Class A common stock, and cash will be paid in lieu of any fractional shares of Berkshire Class B common stock.

 

Q:	What is the collar and how does it work?

 

A:

The stock component of the merger consideration is subject to a collar, whereby if the Class A average trading value is equal to or between $79,777.34 and $124,652.09 (the “collar”), then the exchange ratio will “float” so as to ensure that the aggregate value of Berkshire common stock received in exchange for each share of BNSF common stock being exchanged for Berkshire shares, as calculated based on the Class A average trading value and the average of the daily volume-weighted average trading prices per share of Berkshire Class B common stock over the ten trading day period ending on the second full trading day prior to completion of the merger (the “Class B average trading value”), is fixed at $100.00 per share of BNSF common stock. If the Class A average trading value is less than $79,777.34 or more than $124,652.09, then the exchange ratio will be fixed at 0.001253489 or 0.000802233, as the case may be. Accordingly, if the Class A average trading value is less than the low end of the collar, then the value of the stock payable per share of BNSF common stock, as calculated based on the Class A average trading value and the Class B average trading value, will be less than the cash payable per share of BNSF common stock. Conversely, if the Class A average trading value is greater than the high end of the collar, then the value of the stock payable per share of BNSF common stock, as calculated based on the Class A average trading value and the Class B average trading value, will be greater than the cash payable per share of BNSF common stock.

By way of example, if the Class A average trading value is $75,000, then the exchange ratio will be fixed at 0.001253489 and stockholders will receive, for each share of BNSF common stock that is exchanged for Berkshire common stock, Berkshire common stock valued, based on the Class A average trading value and the Class B average trading value, at approximately $94.01 (0.001253489 x $75,000), which is less than the $100.00 per share received for shares that are exchanged for cash. Alternatively, if the Class A average trading value is $130,000, then the exchange ratio will be fixed at 0.000802233 and stockholders will receive, for each share of BNSF common stock that is exchanged for Berkshire common stock, Berkshire common stock valued, based on the Class A average trading value and the Class B average trading value, at approximately $104.29 (0.000802233 x $130,000), which is more than the $100.00 per share received for shares that are exchanged for cash.

For further information, please see the section titled “The Merger Agreement—Merger Consideration” beginning on page 75.

 

Q:	Am I guaranteed to receive the form of merger consideration that I elect to receive for my shares of BNSF common stock?

 

A:

No. Under the merger agreement, approximately 60% of the total merger consideration payable by Berkshire to BNSF stockholders will be in the form of cash and approximately 40% will be in the form of Berkshire common stock. The cash and stock elections that BNSF stockholders make with respect to their shares may be subject to proration and reallocation to achieve as closely as practicable this 60/40 cash-stock split. Accordingly, depending on the elections made by other BNSF stockholders, each BNSF stockholder who elects to receive all cash for their shares in the merger may receive a portion of their consideration in Berkshire common stock, and each BNSF stockholder who elects to receive all Berkshire common stock for their shares in the merger may receive a portion of their consideration in cash. A BNSF stockholder who elects to receive a combination of cash and Berkshire common stock for their shares in the merger may receive cash and Berkshire common stock in a proportion different from that which such stockholder elected. For further information, please see the section titled “The Merger Agreement—Merger Consideration” beginning on page 75.

 

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Q:	How do I make my election?

 

A:

To elect to receive cash, shares of Berkshire Class A common stock or some combination thereof, you must indicate on the election form, which will be sent to you in a separate mailing, the number of shares of BNSF common stock with respect to which you elect to receive cash and the number of shares of BNSF common stock with respect to which you elect to receive shares of Berkshire Class A common stock. You must return the form in the separate envelope provided so that it is received prior to the election deadline, which will be at 5:00 p.m., New York time, on the second business day prior to the effective time of the merger (which will be announced at least five business days in advance of the effective time by Berkshire). For further information, please see the section titled “The Merger Agreement—Stockholder Elections” beginning on page 77.

 

Q:	Can I revoke or change my election after I mail my election form?

 

A:

Yes. You may revoke or change your election by sending written notice thereof to the exchange agent, which notice must be received by the exchange agent prior to the election deadline noted above. In the event an election form is revoked, under the merger agreement the shares of BNSF common stock represented by such election form will be treated as shares in respect of which no election has been made, except to the extent a subsequent election is properly made by the stockholder during the election period. For more information, please see the section titled “The Merger Agreement—Stockholder Elections” beginning on page 77.

 

Q:	What happens if I do not make an election or my election form is not received before the election deadline?

 

A:

Any shares of BNSF common stock with respect to which the exchange agent does not receive a properly completed and timely election form will be deemed not to have made an election. In exchange for such shares of BNSF common stock, you will receive cash or shares of Berkshire common stock as necessary to achieve as closely as practicable the 60/40 cash-stock split (as described above) with respect to all BNSF shares eligible for merger consideration, taking into account cash and stock elections by all BNSF stockholders who make such elections, unless shares of Berkshire Class A common stock are trading outside the collar (as described above), in which case you will be deemed to have elected whichever form of merger consideration has the higher value, subject to any proration or reallocation necessary to achieve as closely as practicable the 60/40 cash-stock split.

 

Q:	How will I receive the merger consideration to which I am entitled?

 

A:

After receiving the proper documentation from you and determining the proper allocations of cash and shares of Berkshire common stock to be paid or issued to BNSF stockholders, the exchange agent will forward to you the cash and/or Berkshire common stock to which you are entitled. More information on the documentation you are required to deliver to the exchange agent may be found under the caption “The Merger Agreement—Payment of the Merger Consideration” beginning on page 77. BNSF stockholders will not receive any fractional shares of Berkshire Class A common stock in the merger. Instead, they will receive shares of Berkshire Class B common stock in lieu of any fractional shares of Berkshire Class A common stock, and cash in lieu of any fractional shares of Berkshire Class B common stock.

 

Q:	Where will shares of Berkshire common stock and BNSF common stock be listed following the merger?

 

A:

Following the merger, the shares of Berkshire Class A and Class B common stock will remain listed on the New York Stock Exchange (the “NYSE”) under the stock symbols “BRK.A” and “BRK.B,” respectively. All shares of BNSF common stock will cease to be publicly-traded and will be delisted from the NYSE upon completion of the merger.

 

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Q:	Am I entitled to appraisal rights in connection with the merger?

 

A:

Under Delaware law, appraisal rights are only available if, among other things, stockholders are required to accept cash for their shares (other than cash in lieu of fractional shares). Therefore, with respect to any shares of BNSF common stock for which you did not elect to receive cash merger consideration, but would be required under the merger agreement to receive cash merger consideration (other than cash in lieu of fractional shares of Berkshire Class B common stock), you may have the right, if you do not vote in favor of the merger agreement, in lieu of receiving the cash merger consideration for those shares, to obtain payment in cash for the “fair value” of those shares as determined by the Delaware Chancery Court. It is possible that the fair value as determined by the Delaware Chancery Court may be more or less than, or the same as, the merger consideration. BNSF reserves the right to take the position that appraisal may only be sought with respect to shares described in the first sentence of this paragraph, and may not be exercised with respect to any shares as to which cash was elected or stock was received. To exercise appraisal rights, you must follow the strict procedures prescribed by Section 262 of the Delaware General Corporation Law. For additional information, please see the section titled “The Merger—Appraisal Rights” beginning on page 69. In addition, the full text of Section 262 of the Delaware General Corporation Law is included as Annex B to this proxy statement/prospectus.

 

Q:	When is the merger expected to be completed?

 

A:

Berkshire and BNSF will complete the merger when all of the conditions to completion of the merger under the merger agreement have been satisfied or waived. Berkshire and BNSF are working toward satisfying these conditions and completing the merger as quickly as possible. Berkshire and BNSF currently expect to complete the merger during the first quarter of 2010. However, because the merger is subject to a number of conditions, some of which are beyond the control of Berkshire and BNSF, exact timing for completion of the merger cannot be predicted with any amount of certainty.

 

Q:	Is the merger taxable to BNSF stockholders for U.S. Federal income tax purposes?

 

A:

Berkshire and BNSF each expect the merger to qualify as a tax-free “reorganization” pursuant to Section 368(a) of the Internal Revenue Code. The U.S. Federal income tax consequences of a reorganization to a BNSF stockholder will depend on the relative mix of cash and Berkshire common stock received by such BNSF stockholder. Assuming that the merger qualifies as a reorganization, you will not recognize any gain or loss for U.S. Federal income tax purposes if you exchange your shares of BNSF common stock solely for shares of Berkshire common stock in the merger, except with respect to cash received in lieu of fractional shares of Berkshire Class B common stock. You will recognize gain or loss if you exchange your shares of BNSF common stock solely for cash in the merger. You will recognize gain, but not loss, if you exchange your shares of BNSF common stock for a combination of Berkshire common stock and cash, but your taxable gain in that case will not exceed the cash you receive in the merger.

Please carefully review the information set forth in the section titled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 90 for a description of the material U.S. Federal income tax consequences of the merger. The tax consequences of the merger to you will depend on your own situation. Please consult your tax advisors for a full understanding of the tax consequences of the merger to you.

 

Q:	Do Berkshire stockholders need to approve the merger?

 

A:

No. However, to facilitate the merger and related transactions, Berkshire stockholders will be asked to approve a restatement to Berkshire’s certificate of incorporation to increase the number of shares of Berkshire Class B common stock and the total number of shares of Berkshire common stock authorized to be issued and to make certain other changes so as to permit and effectuate a 50-for-1 stock split with respect to the Berkshire Class B common stock. A special meeting of Berkshire stockholders will be called to consider and vote on this proposal. However, obtaining the stockholder vote necessary to effect the Berkshire Class B stock split is not a condition to completion of the merger.

 

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Q:	Will Berkshire stockholders receive any shares or other consideration as a result of the merger?

 

A:

No. Except for any shares of Berkshire Class B common stock received as a result of the proposed stock split described above, Berkshire stockholders will not receive any shares or consideration as a result of the merger and will continue to hold the shares of Berkshire common stock they owned prior to the effective time of the merger.

 

Q:	What will happen to outstanding BNSF equity compensation awards in the merger?

 

A:

The Board of Directors of BNSF (the “BNSF Board”) will adjust the terms of all BNSF stock options, restricted stock units and awards of restricted shares (to the extent that the vesting of any award of BNSF restricted shares is not accelerated prior to completion of the merger as the merger agreement generally requires) outstanding immediately prior to the effective time of the merger to provide that, at the effective time of the merger, each such stock option, restricted stock unit (including any shares of “performance stock” issuable with respect to such BNSF restricted stock unit) and award of restricted shares shall be deemed to be an option to acquire shares of Berkshire Class B common stock, a restricted stock unit with respect to Berkshire Class B common stock (including performance shares) or an award of restricted shares of Berkshire Class B common stock, as the case may be. For additional information, please see the section titled “The Merger Agreement—Treatment of BNSF Equity Compensation Awards” beginning on page 78.

 

Q:	What are the conditions to consummation of the merger?

 

A:	In addition to the BNSF stockholder approvals described above, the conditions to consummation of the merger include the following:

 

•

the shares of Berkshire Class A and Class B common stock issuable to BNSF stockholders in the merger having been approved for listing on the NYSE, subject to official notice of issuance;

 

•

the waiting period under the Hart-Scott-Rodino Act having been terminated or expired, any required approval from the Federal Communications Commission having been obtained and all other material governmental consents and approvals having been obtained;

 

•

no statute, rule, regulation, judgment, order or injunction prohibiting, restraining or making the merger illegal having been issued;

 

•

the representations and warranties of each party to the merger agreement remaining true and correct in all material respects as of the closing date;

 

•

each party to the merger agreement having performed or complied with all of its material obligations, agreements and covenants under the merger agreement;

 

•

holders of BNSF equity compensation awards (such as stock options and restricted stock units) no longer having the right to acquire shares of BNSF common stock or any other equity securities of BNSF pursuant to such awards; and

 

•

BNSF and Berkshire each having received an opinion from its legal counsel to the effect that the merger will qualify as a tax-free reorganization for U.S. Federal income tax purposes.

 

Q:	Will I still be paid dividends prior to the merger?

 

A:

BNSF’s dividend for the fourth quarter of 2009 that was declared in October 2009 will still be paid in January 2010, as usual. If the BNSF Board makes a determination that a dividend is payable in respect of the first quarter of 2010, and the closing of the merger would occur prior to the date on which BNSF would otherwise pay such dividend for the first quarter, BNSF is permitted under the merger agreement to accelerate the payment of the first quarter dividend and pay a prorated dividend based on the portion of the first quarter dividend period that is completed prior to closing. However, no dividend shall be paid unless and until the BNSF Board, in its sole discretion, makes a declaration that such dividend is payable.

 

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Q:	Are there any risks in the merger that I should consider?

 

A:	Yes. There are risks associated with all business combinations, including the merger. These risks are discussed in more detail in the section titled “Risk Factors” beginning on page 26.

 

Q:	Where can I find more information about the parties to the merger?

 

A:	You can find more information about Berkshire and BNSF from the various sources described in the section titled “Where To Find More Information” beginning on page 116.

Questions About the Special Meeting of BNSF stockholders

 

Q:	When and where will the special meeting be held?

 

A:	The special meeting is scheduled to be held at [—], on [—] at [—], local time.

 

Q:	On what am I being asked to vote?

 

A:

You are being asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of November 2, 2009, by and among Berkshire, Merger Sub and BNSF, a copy of which is attached to this proxy statement/prospectus as Annex A. The merger agreement is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 36 and 75, respectively.

 

Q:	How does the BNSF Board recommend that I vote regarding the merger agreement?

 

A:	The BNSF Board unanimously recommends that BNSF stockholders vote “FOR” the adoption of the merger agreement.

 

Q:	How do I vote my shares at the special meeting?

 

A:	If you are a registered stockholder, you may vote in person at the special meeting. However, to ensure that your shares are represented at the special meeting, you are recommended to vote promptly by proxy by taking any of the following steps, even if you plan to attend the meeting in person:

 

•

call the toll-free number specified on the enclosed proxy card and follow the instructions when prompted;

 

•

access the Internet website specified on the enclosed proxy card and follow the instructions provided to you; or

 

•

complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided.

If you are not a registered stockholder, but instead hold your shares in “street name” through a bank, broker or other nominee, please follow the instructions provided to you by your bank, broker or other nominee to vote by proxy and ensure your shares are represented at the special meeting. If you want to vote in person at the special meeting, you must provide a proxy executed in your favor from your bank, broker or other nominee. For more information, please see the section titled “Special Meeting of BNSF Stockholders—Voting at the Special Meeting” beginning on page 32.

If you hold shares through any of BNSF’s 401(k) savings plans, only the trustees of such plans can vote those shares on your behalf. Your proxy card permits you to direct the trustee how to vote the number of shares allocated to your account. In order to direct the trustee how to vote your shares, you must return your directions to the trustee so that they are received no later than [—] on [—]. 401(k) plan participants may not vote their plan shares in person at the special meeting.

 

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Q:	What happens if I do not vote or submit a proxy, or do not instruct my bank, broker or other nominee to vote, or abstain from voting?

 

A:	If you fail to vote, either in person or by proxy, or fail to instruct your bank, broker or other nominee how to vote, or abstain from voting, it will have the same effect as a vote cast “AGAINST” the proposal to adopt the merger agreement.

 

Q:	What should I do if I want to change my vote?

 

A:	If you are a registered stockholder, you can revoke your proxy at any time before it is voted at the special meeting by:

 

•

submitting a new proxy with a later date by using the telephone or Internet voting procedures, or by completing, signing, dating and returning a proxy card by mail to BNSF;

 

•

attending the special meeting and voting in person; or

 

•

sending written notice of revocation to the Corporate Secretary at Burlington Northern Santa Fe Corporation, 2650 Lou Menk Drive, Fort Worth, Texas 76131.

If you are not a registered stockholder, but instead hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee in order to revoke your proxy and submit new voting instructions.

 

Q:	If my bank, broker or other nominee holds my shares in “street name,” will they be able to vote my shares for me without my instructions?

 

A:

No. If you do not provide specific voting instructions to your bank, broker or other nominee, your bank, broker or other nominee will not be able to vote your shares, which will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. You should receive instructions regarding voting procedures directly from your bank, broker or other nominee. You should follow the directions provided to you to vote your shares, or you should instruct your bank, broker or other nominee to vote your shares, following the procedure your bank, broker or other nominee provides to you.

 

Q:	How are shares held in any of BNSFs 401(k) savings plans voted?

 

A:

If you are a participant in any of BNSF’s 401(k) savings plans, your proxy card permits you to direct the trustee how to vote the number of shares allocated to your account. The trustees of BNSF’s 401(k) plans also vote allocated shares of common stock for which they have not received direction in the same proportion as directed shares are voted. In order to direct the trustee how to vote your shares, you must return your directions to the trustee so that they are received no later than [—] on [—].

 

Q:	How are shares held in BNSF’s dividend reinvestment plan voted?

 

A:

Shares held in BNSF’s dividend reinvestment plan will be voted in accordance with the vote indicated by the stockholder of record on the proxy. If the proxy is properly executed and returned but no choice is indicated, both record shares and shares held in BNSF’s dividend reinvestment plan will be voted in accordance with BNSF’s recommendations above. If a stockholder holds shares both of record and in the dividend reinvestment account and does not vote the shares held of record, the stockholder’s shares held in the dividend reinvestment account will not be voted.

 

Q:	What happens if I transfer my shares after the record date for the special meeting?

 

A:	The record date for the special meeting is earlier than the expected date of completion of the merger. Therefore, if you transfer your shares of BNSF common stock after the record date, but prior to completion

 

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of the merger, you will retain the right to vote at the special meeting, but the person to whom you transferred your shares of BNSF common stock will have the right to be paid the merger consideration in respect of those shares following completion of the merger.

 

Q:	Should I send my stock certificates with my proxy card?

 

A:	No. Please do not send your stock certificates with your proxy card. Promptly after the completion of the merger, the exchange agent will mail to you a letter of transmittal with instructions for exchanging your BNSF stock certificates for the merger consideration.

 

Q:	Who can help answer my questions?

 

A:	If you have more questions about the merger or the special meeting, or desire additional copies of this proxy statement/prospectus or additional proxy cards, please contact:

Innisfree M&A Incorporated

501 Madison Avenue

20^th Floor

New York, New York 10022

PHONE (TOLL-FREE): (877) 456-3463

or

Burlington Northern Santa Fe Corporation

2650 Lou Menk Drive

Fort Worth, Texas 76131

Attention: Investor Relations

PHONE: (817) 352-6452

For media inquiries, please contact:

Burlington Northern Santa Fe Corporation

2650 Lou Menk Drive

Fort Worth, Texas 76131

Attention: Corporate Relations

PHONE: (817) 867-6407

 

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RISK FACTORS

In addition to the other information included and incorporated by reference into this proxy statement/prospectus, including the matters addressed in the section titled “Forward-Looking Statements,” you should carefully consider the following risks before deciding whether to vote for adoption of the merger agreement. In addition, you should read and consider the risks associated with each of the businesses of BNSF and Berkshire. These risks can be found in BNSF’s and Berkshire’s respective Annual Reports on Form 10-K for the year ended December 31, 2008, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. For further information regarding the documents incorporated into this proxy statement/prospectus by reference, please see the section titled “Where To Find More Information” beginning on page 116.

Because the market price of Berkshire Class A common stock will fluctuate, BNSF stockholders cannot be sure of the market value of Berkshire Class A or Class B common stock that they will receive in the merger.

At the time the merger is completed, each share of BNSF common stock (other than certain restricted shares, shares owned by Berkshire, BNSF or any of their respective subsidiaries, or shares in respect of which appraisal rights have been properly exercised and not withdrawn) will be converted into the right to receive, at the election of the stockholder (subject to the proration and reallocation procedures described below), either (i) $100.00 in cash, without interest, or (ii) a portion of a share of Berkshire Class A common stock equal to the exchange ratio (as described below), with shares of Berkshire Class B common stock issued in lieu of any fractional shares of Berkshire Class A common stock, and cash paid in lieu of any fractional shares of Berkshire Class B common stock. The exchange ratio is subject to a collar and may fluctuate, depending on the market price of Berkshire Class A common stock. If the Class A average trading value is equal to or between $79,777.34 and $124,652.09, then the number of shares of Berkshire Class A common stock exchangeable for each share of BNSF common stock will be determined by dividing $100.00 by the Class A average trading value.

Within the price range prescribed by the collar, the exchange ratio “floats” so as to ensure that the aggregate value of Berkshire common stock to be received in exchange for each share of BNSF common stock, as calculated based on the Class A average trading value and the Class B average trading value, will be $100.00 per share of BNSF common stock. If the Class A average trading value is less than $79,777.34, the exchange ratio will be fixed at 0.001253489 shares of Berkshire Class A common stock for each share of BNSF common stock. If the Class A average trading value is greater than $124,652.09, the exchange ratio will be fixed at 0.000802233 shares of Berkshire Class A common stock for each share of BNSF common stock. Accordingly, if the Class A average trading value is less than the low end of the collar, then the value of the stock portion of the merger consideration to be paid per share of BNSF common stock, as calculated based on the Class A average trading value and the Class B average trading value, will be less than the cash portion of such consideration. Conversely, if the Class A average trading value is greater than the high end of the collar, then the value of the stock portion of the merger consideration to be paid per share of BNSF common stock, as calculated based on the Class A average trading value and the Class B average trading value, will be greater than the cash portion of such consideration.

There will be a time lapse between the date on which BNSF stockholders vote on the merger agreement at the special meeting and the date on which BNSF stockholders entitled to receive shares of Berkshire common stock actually receive such shares. The market value of Berkshire common stock may fluctuate during this period. These fluctuations may be caused by changes in the businesses, operations, results and prospects of both Berkshire and BNSF, market expectations of the likelihood that the merger will be completed and the timing of the completion, the effect of any of the conditions or restrictions imposed on or proposed with respect to the merging parties by regulatory agencies, general market and economic conditions or other factors. At the time BNSF stockholders cast their votes regarding approval of the merger agreement and make their election in respect of the merger consideration to be paid to them, BNSF stockholders will not know the actual market value

 

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of the shares of Berkshire common stock they will receive when the merger is finally completed. The actual market value of Berkshire shares, when received by BNSF stockholders, will depend on the market value of those shares on that date. This market value may be less than the value used to determine the number of shares to be received, as the determination will be made with respect to a period occurring prior to the consummation of the merger.

BNSF and Berkshire stockholders are urged to obtain current market quotations for shares of Berkshire Class A and Class B common stock and BNSF common stock.

BNSF stockholders may receive a combination of consideration different from that which they elect, and while such elections are being calculated, may not be able to transfer the shares of Berkshire common stock, if any, to which they may be entitled.

In the merger, BNSF stockholders may not receive the entirety of their merger consideration in the form which they have elected to receive. While each BNSF stockholder may elect to receive all cash or all Berkshire common stock for each of their shares of BNSF common stock in the merger, the pools of cash and Berkshire common stock available for all BNSF stockholders in the aggregate will be fixed at approximately 60% and 40%, respectively, of the total merger consideration. Accordingly, depending on the elections made by other BNSF stockholders, each BNSF stockholder who elects to receive all cash for their shares in the merger may receive a portion of their consideration in Berkshire common stock, and each BNSF stockholder who elects to receive all Berkshire common stock for their shares in the merger may receive a portion of their consideration in cash. A BNSF stockholder who elects to receive a combination of cash and Berkshire common stock for their shares in the merger may receive cash and Berkshire common stock in a proportion different from what such stockholder elected. If a BNSF stockholder does not submit a properly completed and signed election form to the exchange agent by the election deadline, such stockholder will receive cash or Berkshire common stock as necessary to achieve as closely as practicable the 60/40 cash-stock split as described above, unless Berkshire’s shares of Class A common stock are trading outside the collar, in which case such stockholder will be deemed to have elected whichever form of consideration has the higher value, subject to proration and reallocation as necessary to achieve as closely as practicable the 60/40 cash-stock split.

The tax consequences to a BNSF stockholder may change in the event such stockholder receives a larger or smaller portion of their merger consideration in cash than such stockholder elected. For additional information, please see the section titled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 90.

The merger and related transactions are subject to certain stockholder approvals.

In order for the merger to be completed, Delaware law requires that the merger must be approved by the affirmative vote of holders of at least 66- ²/3% of the issued and outstanding shares of BNSF common stock not owned by Berkshire or any of its affiliates or associates, as well as by the vote of holders of a majority of the issued and outstanding shares of BNSF common stock.

In addition, while a vote of Berkshire stockholders is not required to approve the merger, approval by a majority of the outstanding shares of Berkshire Class A and Class B common stock voting together, and by the holders of a majority of the outstanding shares of Berkshire Class B common stock and by the holders of a majority of the outstanding shares of Berkshire Class A common stock, each voting as a separate class, will be necessary to approve the restatement of Berkshire’s certificate of incorporation in order to increase Berkshire’s authorized share capital so as to permit and effectuate a 50-for-1 stock split with respect to the Berkshire Class B common stock.

 

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Directors and executive officers of BNSF have interests in the merger that are different from, or in addition to, the interests of BNSF stockholders generally in recommending that BNSF stockholders vote in favor of the merger agreement.

Some of the directors and executive officers of BNSF have interests in the merger that are different from, or in addition to, the interests of BNSF stockholders generally. These interests include:

 

•

the vesting and settlement of BNSF restricted stock units held by directors;

 

•

funding of a director’s benefits under BNSF’s Directors’ Charitable Award Program;

 

•

conversion of BNSF stock options held by executive officers and one non-employee director and BNSF restricted stock units held by executive officers into Berkshire equity awards;

 

•

payment of directors’ benefits under BNSF’s director deferred compensation and retirement plans;

 

•

settlement of executive officers’ units in BNSF’s Senior Management Stock Deferral Plan;

 

•

vesting of executive officers’ unvested benefits in BNSF’s supplemental retirement plans;

 

•

executive officers’ receipt of certain benefits under their change in control agreements if certain terminations of employment occur in connection with the merger;

 

•

funding of BNSF’s Benefits Protection Trust with respect to certain benefit plans and agreements; and

 

•

Berkshire’s agreement to indemnify directors and officers against certain claims and liabilities and to continue such indemnification for a period of six years from the effective time of the merger.

BNSF stockholders should consider these interests in connection with their votes to adopt the merger agreement. For more information, please see the section titled “The Merger—Interests of BNSF Directors and Executive Officers in the Merger” beginning on page 63.

The merger is subject to the receipt of consents and approvals from various governmental entities, which may impose conditions on, jeopardize or delay completion of the merger or reduce the anticipated benefits of the merger.

Completion of the merger is conditioned upon filings with, and the receipt of required consents, orders, approvals or clearances from, various governmental entities, including the DOJ, the FTC and the FCC. There can be no assurance that all of these required consents, orders, approvals and clearances will be obtained. If they are obtained, at any time before or after the time that the merger is effective, governmental entities may impose conditions on, or require divestitures relating to, the divisions, operations or assets of Berkshire or BNSF. These conditions or divestitures may jeopardize or delay completion of the merger or reduce the anticipated benefits of the merger.

Any delay in completing the merger may reduce or eliminate the benefits expected.

In addition to the required stockholder approvals and regulatory clearances and approvals, the merger is subject to certain other conditions beyond the control of Berkshire and BNSF that may prevent, delay, or otherwise materially adversely affect completion of the merger. BNSF cannot predict whether and when these other conditions will be satisfied. The requirements for satisfying such conditions could delay completion of the merger for a period of time, reducing or eliminating some anticipated benefits of the merger, or prevent completion of the merger from occurring at all. For further information, please see the section titled “The Merger Agreement—Conditions to the Merger” beginning on page 83.

The pendency of the merger could materially adversely affect the future business and operations of Berkshire and BNSF and/or result in a loss of BNSF employees.

In connection with the pending merger, while it is not expected by the respective managements of Berkshire and BNSF, it is possible that some customers, suppliers and other persons with whom Berkshire or BNSF have a business relationship may delay or defer certain business decisions, which could negatively impact revenues, earnings and cash flows of Berkshire or BNSF, as well as the market prices of Berkshire common stock or BNSF

 

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common stock, regardless of whether the merger is completed. Similarly, current and prospective employees of BNSF may experience uncertainty about their future roles with BNSF following completion of the merger, which may materially adversely affect the ability of BNSF to attract and retain key employees. While no changes in BNSF’s management are expected as a result of the merger, BNSF may nevertheless lose some members of management and other key employees following the completion of the merger.

The fairness opinions obtained by BNSF from its financial advisors will not reflect subsequent changes.

Goldman Sachs and Evercore, BNSF’s financial advisors in connection with the proposed merger, have each delivered to the BNSF Board its respective opinion dated as of November 2, 2009. The opinion of Goldman Sachs stated that as of such date, and based upon and subject to the factors and assumptions set forth therein, the stock consideration and the cash consideration, taken in the aggregate, to be paid to the holders (other than Berkshire and its affiliates) of the outstanding shares of BNSF common stock pursuant to the merger agreement, was fair from a financial point of view to such holders. The opinion of Evercore stated that, as of the date thereof, based upon and subject to the assumptions, limitations, qualifications and other matters set forth in its opinion letter, the merger consideration was fair, from a financial point of view, to the holders (other than Berkshire and its affiliates) of the shares of BNSF common stock entitled to receive such consideration. The opinions do not reflect changes that may occur or may have occurred after the date of the opinions, including changes to the operations and prospects of Berkshire or BNSF, changes in general market and economic conditions or regulatory or other factors. Any such changes, or other factors on which the opinions are based, may materially alter or affect the relative values of Berkshire and BNSF.

If the merger is not completed by June 30, 2010, either Berkshire or BNSF may choose not to proceed with the merger.

Either Berkshire or BNSF may terminate the merger agreement if the merger has not been completed by June 30, 2010, unless the failure of the merger to have been completed by such date was the result of the failure of the party seeking to terminate the merger agreement to have performed its obligations thereunder. This date may be extended on a day-by-day basis for each day during which any party to the merger agreement is subject to a nonfinal order, decree, ruling or action restraining, enjoining or otherwise prohibiting the consummation of the merger, but may not be extended past July 31, 2010. For more information, please see the section titled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 86.

The merger may not qualify as a tax-free reorganization under the Code, and therefore BNSF stockholders may recognize gain on the shares of any Berkshire common stock they receive.

Although Berkshire and BNSF believe that the merger should qualify as a tax-free “reorganization” under the Code, it is possible that the Internal Revenue Service (the “IRS”) may assert that the merger fails to qualify as such. If the IRS were to be successful in any such contention, or if for any other reason the merger were to fail to qualify as a tax-free reorganization, each BNSF stockholder would recognize gain or loss with respect to all such stockholder’s shares of BNSF common stock based on the difference between (i) that stockholder’s tax basis in such shares and (ii) the aggregate cash and the fair market value of the Berkshire common stock received. For additional information, please see the section titled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 90.

A different set of factors and conditions affect Berkshire stock and could have a negative impact on its stock price.

Upon completion of the merger, some BNSF stockholders will become holders of Berkshire common stock. The businesses and markets of Berkshire and the other companies it has acquired and may acquire in the future are different from those of BNSF. There is a risk that various factors, conditions and developments which would not affect the price of BNSF’s stock could negatively affect the price of Berkshire’s stock. Please see the section titled “Forward-Looking Statements” beginning on page 30 for a summary of some of the key factors that might affect Berkshire and the prices at which Berkshire Class A and Class B common stock may trade from time to time.

 

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FORWARD-LOOKING STATEMENTS

Statements set forth or incorporated by reference herein concerning projections or expectations of financial or operational performance or economic outlook, or concerning other future events or results, or which refer to matters which are not historical facts, are “forward-looking statements” within the meaning of the Federal securities laws. Similarly, statements that describe BNSF’s or Berkshire’s objectives, expectations, plans or goals are forward-looking statements. Forward-looking statements include, without limitation, BNSF’s or Berkshire’s expectations concerning the marketing outlook for their respective businesses, productivity, plans and goals for future operational improvements and capital investments, operational performance, future market conditions or economic performance and developments in the capital and credit markets and expected future financial performance, as well as any information concerning possible or assumed future results of operations of Berkshire and BNSF as set forth in the sections of this proxy statement/prospectus titled “Summary Unaudited Pro Forma Condensed Combined Financial Data,” “Comparative Historical and Unaudited Pro Forma Per Share Data,” “The Merger—Recommendation of the BNSF Board and its Reasons for the Merger,” “The Merger—Berkshire’s Reasons for the Merger,” “The Merger—Opinions of BNSF’s Financial Advisors” and “Unaudited Pro Forma Condensed Combined Financial Information.” Forward-looking statements also include statements regarding the expected benefits of the proposed acquisition of BNSF by Berkshire.

Forward-looking statements involve a number of risks and uncertainties, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:

 

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the matters described in the section titled “Risk Factors” beginning on page 26;

 

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adverse changes in economic or industry conditions, both in the United States and globally;

 

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continuing volatility in the capital or credit markets and other changes in the securities and capital markets;

 

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changes affecting customers or suppliers;

 

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competition and consolidation in the industries in which BNSF and Berkshire compete;

 

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labor costs and labor difficulties;

 

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developments and changes in laws and regulations;

 

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developments in and losses resulting from claims and litigation;

 

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natural events such as severe weather, fires, floods and earthquakes, or acts of terrorism;

 

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changes in operating conditions and costs; and

 

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the extent of BNSF’s or Berkshire’s ability to achieve their respective operational and financial goals and initiatives.

In addition, the acquisition of BNSF by Berkshire is subject to the satisfaction of the conditions to the completion of the acquisition and the absence of events that could give rise to the termination of the merger agreement, and the possibility that the acquisition does not close, and risks that the proposed acquisition disrupts current plans and operations and business relationships, or poses difficulties in attracting or retaining employees.

We caution against placing undue reliance on forward-looking statements, which reflect our current beliefs and are based on information currently available to us as of the date a forward-looking statement is made. Forward-looking statements set forth or incorporated by reference herein speak only as of the date of this proxy statement/prospectus or the date of the document incorporated by reference into this proxy statement/prospectus, as the case may be. We undertake no obligation to revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs. In the event that we do update any forward-looking statements, no inference should be made that we will make additional updates with respect to that statement, related matters, or any other forward-looking statements. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from forward-looking statements, including discussions of significant risk factors, may appear in BNSF’s or Berkshire’s public filings with the SEC, which are accessible at www.sec.gov, and which you are advised to consult. For additional information, please see the section titled “Where To Find More Information” beginning on page 116.

 

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SPECIAL MEETING OF BNSF STOCKHOLDERS

General Information

The BNSF Board is using this proxy statement/prospectus to solicit proxies to be voted at the special meeting of BNSF stockholders described below. Your vote is very important. For this reason, the BNSF Board is requesting that you allow your shares to be represented at the special meeting by the proxies named on the enclosed proxy card. BNSF began mailing this proxy statement/prospectus and the form of proxy on or about [—].

Date, Time and Place of Special Meeting

The special meeting is scheduled to be held at [—], on [—] at [—], local time.

Purpose of Special Meeting

At the special meeting, BNSF stockholders will be asked to consider and vote on:

 

•

a proposal to adopt the Agreement and Plan of Merger, dated as of November 2, 2009, by and among Berkshire, Merger Sub and BNSF, which agreement is further described in the sections titled “The Merger” and “The Merger Agreement,” beginning on pages 36 and 75, respectively; and

 

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the transaction of any other business that may properly be brought before the special meeting, or any adjournments or postponements thereof, including, without limitation, a motion to adjourn or postpone the special meeting to another time and/or place for the purpose of soliciting additional proxies in favor of the proposal to adopt the merger agreement, if necessary.

Recommendation of the BNSF Board

The BNSF Board has unanimously approved the merger agreement and the transactions contemplated by it, declared its advisability and determined that the merger agreement and the transactions contemplated by it are fair to and in the best interests of BNSF and its stockholders.

The Board of Directors of BNSF unanimously recommends that you vote “FOR” the adoption of the merger agreement.

Please see the section titled “The Merger—Recommendation of the BNSF Board and its Reasons for the Merger” beginning on page 40 for more information.

Required Vote

The adoption of the merger agreement requires the affirmative vote of:

 

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holders of at least 66- 2/3% of the issued and outstanding shares of BNSF common stock not owned by Berkshire or any of its affiliates or associates; and

 

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holders of a majority of the issued and outstanding shares of BNSF common stock.

Record Date; Voting

Only holders of record of BNSF common stock at the close of business on [—] are entitled to notice of, and to vote at, the special meeting and at any adjournment of the meeting. A complete list of BNSF stockholders entitled to vote at the special meeting will be available during the ten day period before the special meeting at BNSF’s offices, located at 2650 Lou Menk Drive, Fort Worth, Texas 76131, for inspection by BNSF stockholders during ordinary business hours for any purpose germane to the special meeting. The stockholder list will also be available at the special meeting for examination by any BNSF stockholder present at the special meeting.

 

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Each share of BNSF common stock entitles the stockholder to one vote.

As of the close of business on [—], the record date for the special meeting, there were [—] shares of BNSF common stock outstanding. As of the same date, Berkshire and its affiliates and associates owned [—] shares of BNSF common stock, representing approximately [—]% of total issued and outstanding shares of BNSF common stock. In addition, as of the same date, the directors and executive officers of BNSF as a group owned and were entitled to vote [—] shares of BNSF common stock, or less than [—]% of the total issued and outstanding shares of BNSF common stock on that date. BNSF currently expects that all directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreement obligating them to do so.

Quorum

No business may be transacted at the special meeting unless a quorum is present. Attendance in person or by proxy at the special meeting of holders of record of a majority of the total number of issued and outstanding shares of BNSF common stock entitled to vote at the meeting will constitute a quorum. If a quorum is not present, or if fewer shares of BNSF common stock are voted in favor of the adoption of the merger agreement than the number required for its adoption, the special meeting may be adjourned or postponed to allow additional time for obtaining additional proxies or votes. At any subsequent reconvening of the special meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the subsequent meeting.

Abstentions and Broker Non-Votes

Abstentions (shares of BNSF common stock for which proxies have been received but for which the holders have abstained from voting) and broker non-votes (shares of BNSF common stock for which proxies have been returned by a broker indicating that the broker has not received voting instructions from the beneficial owner of the shares and does not have discretionary authority to vote the shares) will be included in the calculation of the number of shares of BNSF common stock represented at the special meeting for purposes of determining whether a quorum has been achieved. However, in accordance with the rules of the NYSE, banks, brokers and other nominees who hold shares of BNSF common stock in “street name” for their customers but do not have discretionary authority to vote the shares may not exercise their voting discretion with respect to the adoption of the merger agreement. Accordingly, if banks, brokers or other nominees do not receive specific voting instructions from the beneficial owner of such shares, they may not vote such shares with respect to the adoption of the merger agreement. For shares of BNSF common stock held in “street name,” only shares of BNSF common stock affirmatively voted “FOR” adoption of the merger agreement will be counted as a favorable vote for such proposal. Abstaining from voting, or failing to provide voting instructions to your bank, broker or other nominee, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

Voting at the Special Meeting

Attendance

All holders of shares of BNSF common stock as of the close of business on [—], the record date for voting at the special meeting, including registered stockholders (stockholders holding shares in their own name) and beneficial owners of stock registered in the “street name” of a bank, broker or other nominee, are invited to attend the special meeting. If you are a registered stockholder, please be prepared to provide proper identification, such as a driver’s license. If you hold your shares in “street name,” you will need to provide proof of ownership, such as a recent account statement or letter from your bank, broker or other nominee, along with proper identification.

We can provide reasonable assistance to help stockholders or their proxy holders with disabilities who wish to attend the special meeting. Please notify us of your plans to attend and describe your disability by writing to the Corporate Secretary at Burlington Northern Santa Fe Corporation, 2650 Lou Menk Drive, Fort Worth, Texas 76131, at least two weeks before the meeting date.

 

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Voting in Person

Registered stockholders will be able to vote in person at the special meeting. If you are not a registered stockholder, but instead hold your shares in “street name” through a bank, broker or other nominee, you must provide a proxy executed in your favor from your bank, broker or other nominee in order to be able to vote in person at the special meeting. If you hold your shares through any of BNSF’s 401(k) plans, you may not vote your shares in person at the special meeting.

Voting by Proxy

To ensure that your shares are represented at the special meeting, you are recommended to vote promptly by proxy, even if you plan to attend the special meeting in person. If you attend the special meeting and wish to vote in person or change your vote, you can always revoke your proxy by voting at the meeting.

If your shares are held by a bank, broker or other nominee on your behalf in “street name,” your bank, broker or other nominee will send you instructions as to how to vote your shares by proxy. Many banks and brokerage firms have a process for their customers to provide voting instructions by telephone or via the Internet. If you do not provide your bank, broker or other nominee with instructions as to how to vote your shares, your bank, broker or other nominee will not be able to vote your shares, which will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

If you are a registered stockholder, you may vote by proxy using one of the methods described below.

Vote by Telephone or via the Internet. This proxy statement/prospectus is accompanied by a proxy card with instructions for voting. You may vote by telephone by calling the toll-free number or via the Internet by accessing the Internet address as specified on the enclosed proxy card. Your shares will be voted as you direct in the same manner as if you had completed, signed, dated and returned your proxy card, as described below.

Vote by Proxy Card. If you complete, sign, date and return the enclosed proxy card by mail so that it is received before the special meeting, your shares will be voted in the manner directed by you on your proxy card. You may vote “FOR,” vote “AGAINST” or abstain from voting with respect to the proposal to adopt the merger agreement.

If you return your signed proxy card, but do not specify how you want to vote your shares, your shares will be voted “FOR” the proposal to adopt the merger agreement. In addition, your shares will be voted in the discretion of the persons appointed as proxies in the proxy card as to any other business that is properly brought before the special meeting or any adjournment or postponement of the meeting. Proxy cards that are returned without a signature will not be counted as present at the special meeting and cannot be voted.

Revocation of Proxies

Your proxy is revocable. If you are a registered stockholder, you can revoke your proxy at any time before it is voted at the special meeting by:

 

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submitting a new proxy with a later date, by using the telephone or Internet voting procedures described above, or by completing, signing, dating and returning a new proxy card by mail to BNSF;

 

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attending the special meeting and voting in person; or

 

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sending written notice of revocation to the Corporate Secretary at Burlington Northern Santa Fe Corporation, 2650 Lou Menk Drive, Fort Worth, Texas 76131.

Attending the special meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if you want to revoke your proxy by mailing a new proxy card to BNSF or by sending a written notice of revocation to the Corporate Secretary, you should ensure that you mail your new proxy card or written notice of revocation in sufficient time for it to be received by BNSF before the day of the special meeting.

 

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If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee in order to revoke your proxy or submit new voting instructions.

Voting Shares Held Through BNSF’s 401(k) Plans

If you hold shares through any of BNSF’s 401(k) savings plans, only the trustees of such plans can vote those shares on your behalf. Your proxy card permits you to direct the trustee how to vote the number of shares allocated to your account. The trustees of BNSF’s 401(k) plans also vote allocated shares of common stock for which they have not received direction in the same proportion as directed shares are voted. In order to direct the trustee how to vote your shares, you must return your directions to the trustee so that they are received no later than [—] on [—].

Voting Shares Held in BNSF’s Dividend Reinvestment Plan

Shares held in BNSF’s dividend reinvestment plan will be voted in accordance with the vote indicated by the stockholder of record on the proxy. If the proxy is properly executed and returned but no choice is indicated, both record shares and shares held in BNSF’s dividend reinvestment plan will be voted in accordance with BNSF’s recommendations above. If a stockholder holds shares both of record and in the dividend reinvestment account and does not vote the shares held of record, the stockholder’s shares held in the dividend reinvestment account will not be voted.

Other Business

The BNSF Board is not currently aware of any business to be acted upon at the special meeting of stockholders other than the proposal to adopt the merger agreement described above. If, however, other matters (including a motion to adjourn or postpone the special meeting for the purpose of soliciting additional proxies in favor of the proposal to adopt the merger agreement, if necessary) are properly brought before the special meeting, or any adjournments or postponements thereof, the persons appointed as proxies in the proxy cards will have discretion to vote or act on such matters according to their judgment.

Adjournments and Postponements

Any adjournment or postponement of the special meeting may be made from time to time by approval of the holders of a majority of the shares of common stock present in person or represented by proxy at the special meeting, whether or not a quorum exists, without further notice other than by an announcement made at the special meeting. If a quorum is not present at the special meeting, or if a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to adopt the merger agreement, then BNSF stockholders may be asked to vote on a proposal to adjourn or postpone the special meeting so as to permit the further solicitation of proxies.

Solicitation of Proxies

The BNSF Board is soliciting proxies to be voted at the special meeting and any adjournment or postponement thereof. Proxies are being solicited through the mail. The directors, executive officers and certain other employees of BNSF may also solicit proxies personally, by telephone, fax, email, the Internet, press release or other means, without additional compensation for such activities. BNSF will bear all expenses relating to the solicitation of proxies from BNSF stockholders, except that BNSF and Berkshire have agreed to share equally expenses incurred in connection with filing, printing and mailing this proxy statement/prospectus.

BNSF has engaged Innisfree M&A Incorporated (“Innisfree”) to assist it in connection with the solicitation of proxies for a fee estimated not to exceed $150,000 in the aggregate, plus additional charges related to telephone calls and certain other services, costs and expenses. BNSF has agreed to indemnify Innisfree against certain liabilities relating to or arising out of the engagement. Innisfree may conduct its solicitation personally, by mail, telephone, fax, email, the Internet, press release or other means.

 

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BNSF will request banks, brokers and other custodians, fiduciaries and nominees to forward proxy soliciting material to the beneficial owners of shares held of record by such banks, brokers or nominees and obtain their voting instructions. BNSF will reimburse such banks, brokers or nominees at approved rates for their reasonable expenses in connection with the foregoing activities.

 

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THE MERGER

Background of the Merger

On October 22, 2009, Mr. Warren E. Buffett, Chairman and Chief Executive Officer of Berkshire, made a previously scheduled visit to the offices of BNSF in Fort Worth, Texas and met with Mr. Matthew K. Rose, Chairman, President and Chief Executive Officer of BNSF, and other senior members of BNSF management. BNSF has a long-standing practice of meeting with investors at their request to discuss BNSF and its performance. Mr. Buffett’s scheduled visit, which took place in line with such practice, also coincided with an annual offsite meeting of the Board of Directors of Berkshire (the “Berkshire Board”) being held from October 22, 2009 to October 24, 2009 in Fort Worth due to the proximity to several Berkshire companies. At the time, Berkshire owned approximately 22.6% of BNSF’s outstanding common stock, which it had previously acquired through open market purchases. At the meeting, Mr. Buffett, Mr. Rose and the BNSF executives discussed a number of general issues, including BNSF’s overall business and financial performance, issues related to the rail industry and the economy as a whole.

On October 23, 2009, Mr. Buffett’s assistant called Mr. Rose’s assistant and requested a meeting between Mr. Buffett and Mr. Rose for early that evening.

At the meeting, Mr. Buffett told Mr. Rose that if the BNSF Board would be receptive, Berkshire would promptly work toward negotiating an agreement for a transaction in which Berkshire would acquire all of the outstanding shares of BNSF not already owned by Berkshire for $100 per share. Mr. Buffett expressed that Berkshire would not want to pursue such a transaction unless it was supported by the BNSF Board. Mr. Buffett discussed a transaction in which 40% of the consideration would be paid in Berkshire common stock and 60% of the consideration would be paid in cash. Mr. Buffett expressed his belief that fair value for BNSF’s common stock was in the mid-$90s per share, and that therefore the $100 per share price he was contemplating was, in Mr. Buffett’s view, as high as Berkshire could pay. Mr. Buffett indicated that he would be willing to consider a collar on the stock portion of the merger consideration, based upon the trading price of Berkshire Class A common stock over a certain period of time prior to completion of the merger. Mr. Buffett also indicated that in the event of an agreement for such a transaction, he would be willing to recommend a stock split with respect to the Berkshire Class B common stock in order to address the issue of fractional shares that would be issued to BNSF stockholders in any transaction and facilitate the rollover of certain BNSF equity compensation awards into equity compensation awards with respect to Berkshire Class B common stock. Mr. Buffett also explained that Berkshire would expect to obtain approximately $8 billion in external financing to consummate such a transaction. Mr. Rose told Mr. Buffett that he would take the matter to the BNSF Board to see if the BNSF Board was interested in considering such a transaction.

The next morning Mr. Rose called Mr. Edward T. Whitacre, Jr., the lead director of BNSF, and related the details of his conversation with Mr. Buffett. Mr. Whitacre and Mr. Rose discussed that the matter needed to be considered by the full BNSF Board, and Mr. Whitacre directed Mr. Rose to inform the other BNSF directors. Mr. Whitacre also directed Mr. Rose to retain appropriate financial and legal advisors to assist the BNSF Board in evaluating the potential transaction. Mr. Rose also discussed with certain directors and senior management the advisors BNSF planned to engage to assist BNSF in evaluating the potential transaction, after which Goldman Sachs and Evercore were contacted. Over the next two days, Mr. Rose notified each member of the BNSF Board and certain senior members of BNSF management of his discussion with Mr. Buffett and the potential transaction. A special meeting of the BNSF Board was scheduled for October 26, 2009 to discuss the potential transaction.

On October 26, 2009, the BNSF Board held a meeting by telephone conference to review and discuss the potential transaction described by Mr. Buffett. At the meeting, Mr. Rose provided a report on his October 23 meeting with Mr. Buffett. Mr. Rose also notified the BNSF Board that he had contacted Goldman Sachs and Evercore following the meeting with Mr. Buffett and his discussions with the directors in order to engage Goldman Sachs and Evercore as financial advisors in connection with the evaluation of the potential transaction.

 

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Mr. Rose reviewed with the directors that Berkshire had an existing investment in Goldman Sachs, and the nature of that investment. The BNSF Board discussed Goldman Sachs’ substantial experience in providing investment banking and other advice to BNSF and its reputation and experience in connection with merger and acquisition transactions. The BNSF Board also discussed that the engagement of Evercore was on the basis that advice and financial analyses of Evercore would be independent of that provided by Goldman Sachs. After discussion, the BNSF Board concurred with the engagement of both Goldman Sachs and Evercore as financial advisors in connection with the potential transaction.

Representatives of Cravath, Swaine & Moore LLP (“Cravath”), BNSF’s outside counsel, then provided an overview of the fiduciary duties of the BNSF Board in connection with the evaluation of the potential transaction. During the meeting, the BNSF Board reviewed BNSF’s stand-alone business plan and outlook, which had also been previously reviewed in accordance with BNSF’s customary practices at the BNSF Board’s September meeting. Representatives of Goldman Sachs reviewed with the BNSF Board their preliminary financial analyses regarding the potential transaction described by Mr. Buffett. During the discussion, representatives of Goldman Sachs expressed their view that a superior proposal from certain other strategic buyers was unlikely to be accretive, except for an acquisition that, in the view of counsel advising the BNSF Board, would present substantial regulatory issues. Representatives of Goldman Sachs and Evercore also expressed their view that the current state of the financial markets and BNSF’s market capitalization would make a superior proposal by a private equity buyer unlikely. The BNSF Board also discussed that if BNSF pursued discussions with Berkshire, any potential agreement would have to provide flexibility to consider bids from unanticipated potential buyers.

During the meeting, the BNSF Board received a preliminary regulatory analysis from members of BNSF management with respect to the potential transaction described by Mr. Buffett. In that discussion, it was noted that Berkshire appeared to have made passive investments in at least two other rail carriers and owned several other transportation-related businesses.

At the conclusion of the meeting, another special meeting of the BNSF Board was scheduled for October 28, 2009 to further discuss the potential transaction and to receive additional information and analyses, including a financial presentation by Evercore.

On October 27, 2009, Mr. Rose telephoned Mr. Buffett and informed him that the BNSF Board had convened the prior day to review and discuss the potential transaction that had been outlined by Mr. Buffett, and that the BNSF Board was still considering the matter. During the conversation, Mr. Rose raised the issue of Berkshire’s investments in two other rail carriers with Mr. Buffett. Mr. Buffett informed Mr. Rose that if an agreement was reached with BNSF, Berkshire would be willing to dispose of any shares held in other rail carriers in order to address any potential regulatory concerns those holdings might raise. Mr. Buffett also informed Mr. Rose that if BNSF wanted to proceed with a transaction along the basis he had described, a structure that provided a collar on the stock portion of the merger consideration would be acceptable to Berkshire if it was preferred by BNSF, and discussed the terms of such a collar with Mr. Rose. In addition, Mr. Buffett told Mr. Rose he would be willing to recommend a 50-for-1 stock split with respect to the Berkshire Class B common stock to facilitate such a transaction. Mr. Rose informed Mr. Buffett that the BNSF Board would meet again the next day and that he would contact him following the meeting.

On October 28, 2009, the BNSF Board held another meeting by telephone conference. At the meeting, Mr. Rose provided the BNSF Board with an update regarding the conversation he had with Mr. Buffett on the previous day. Also at the meeting, Evercore reviewed with the BNSF Board its preliminary financial analyses regarding the potential transaction described by Mr. Buffett. Evercore reiterated to the BNSF Board that its analyses were prepared independently of Goldman Sachs. Representatives of Goldman Sachs then discussed with the BNSF Board their updated preliminary financial analyses with respect to the potential transaction. The BNSF Board also received additional regulatory analysis from Mayer Brown LLP (“Mayer Brown”), BNSF’s outside regulatory counsel, with respect to the potential transaction. In connection with the discussion, the BNSF Board considered a number of matters, including the value that would be obtained by the stockholders of BNSF in the potential transaction as compared to the value that could be obtained by BNSF continuing as a stand-alone entity.

 

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The BNSF Board also considered whether to contact other potential acquirors to solicit interest for an acquisition of BNSF. During the discussion, representatives of Goldman Sachs and Evercore each expressed their view that a superior proposal from certain other strategic buyers was unlikely to be accretive, except for an acquisition that, in the view of counsel advising the BNSF Board, would present substantial regulatory issues. Representatives of Goldman Sachs and Evercore also expressed their view that the current state of the financial markets and BNSF’s market capitalization would make a superior proposal by a private equity buyer unlikely.

After extensive discussion, the BNSF Board authorized Mr. Rose, together with BNSF’s financial and legal advisors, to enter into discussions with Berkshire in respect of a potential transaction, including attempting to obtain a higher price and otherwise negotiating a merger agreement on the most favorable terms that could be obtained from Berkshire. The BNSF Board also concluded that it would be in the best interests of BNSF and its stockholders not to solicit other bids for the company prior to executing a merger agreement, but to pursue discussions regarding a potential transaction with Berkshire. However, the BNSF Board instructed management and BNSF’s financial and legal advisors to seek merger agreement terms, including a break-up fee that would be very low in relation to market standards, that would allow BNSF to entertain third party bids if a merger agreement were to be executed and announced.

That same day, after the meeting, Mr. Rose consulted with BNSF’s financial and legal advisors regarding their advice with respect to the issues he intended to discuss with Mr. Buffett concerning the proposed transaction. Mr. Rose then telephoned Mr. Buffett and informed him that the BNSF Board had authorized management and BNSF’s financial and legal advisors to enter into discussions with respect to a potential acquisition of BNSF by Berkshire and negotiate a merger agreement. During the call, Mr. Rose discussed with Mr. Buffett various issues relating to the potential transaction, including price, the structure of a collar on the stock portion of the consideration, the size of the break-up fee that would be payable in the event that BNSF determined to pursue an alternative transaction after entering into a merger agreement with Berkshire and the need to conduct a diligence investigation with Mr. Buffett in respect of Berkshire.

Mr. Rose requested that Mr. Buffett increase the merger consideration above $100 per share. In response, Mr. Buffett informed Mr. Rose that $100 per share was at the very top of the range that he was willing to pay for BNSF and therefore Berkshire would not be willing to increase the merger consideration. In that discussion, Mr. Buffett confirmed to Mr. Rose that Berkshire would agree to a collar on the stock portion of the consideration, such that the value of the stock portion of the consideration would be fixed at $100 per share so long as the shares of Berkshire Class A common stock traded between approximately $80,000 and $125,000 per share. Mr. Rose then explained to Mr. Buffett that the BNSF Board was seeking favorable terms with respect to BNSF’s ability to terminate any agreement with Berkshire in response to a competing proposal that the BNSF Board determined was superior. Mr. Rose requested that Berkshire agree to a break-up fee in that context of 1% of the equity value of BNSF (based on the price of $100 per share), calculated excluding shares owned by Berkshire and its affiliates. Mr. Buffett said this request would be acceptable in the context of the potential transaction being discussed. Finally, Mr. Rose explained to Mr. Buffett that BNSF would require access to Mr. Buffett in order to engage in diligence with respect to Berkshire. Mr. Buffett responded by agreeing to make himself available to BNSF and its advisors in this regard. Mr. Buffett then told Mr. Rose that he would instruct Munger, Tolles & Olson LLP (“Munger Tolles”), Berkshire’s outside counsel, to begin drafting a merger agreement containing the terms and conditions upon which Berkshire would be willing to acquire BNSF.

On the evening of October 29, 2009, Munger Tolles circulated a draft merger agreement to Cravath.

On the morning of October 30, 2009, BNSF executed a confidentiality agreement with Berkshire. After execution of this agreement, BNSF, together with representatives from Goldman Sachs and Evercore, engaged in a session with Mr. Buffett in which Mr. Buffett reviewed and discussed various matters related to Berkshire, including a discussion of the publicly available estimates of a certain research analyst and current consensus analyst forecasts regarding Berkshire.

 

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That same day, two members of the BNSF Board, Messrs. Boeckmann and Whisler, who had been unable to attend the meeting of the BNSF Board held on October 28, 2009, each received a detailed briefing from Mr. Rose and other members of BNSF management, along with representatives of Cravath, Goldman Sachs and Evercore, with respect to the matters discussed at that meeting.

From October 30, 2009 through November 2, 2009, BNSF, Berkshire and their respective legal advisors negotiated the terms of the draft merger agreement.

On October 31, 2009, a special meeting of the Compensation and Development Committee of the BNSF Board was held by telephone conference. At the meeting, members of BNSF management and representatives of Cravath reviewed with the Committee members the effect that the potential transaction would have on BNSF’s existing employee benefit plans and arrangements, including the effect on BNSF equity awards and arrangements of members of BNSF management and the BNSF Board.

On the afternoon of November 2, 2009, the BNSF Board held a special meeting in Detroit, Michigan to review and discuss the contemplated merger agreement and its terms. Representatives of Goldman Sachs and Evercore reviewed with the BNSF Board the meeting held with Mr. Buffett on October 30, 2009. Representatives of Cravath provided an overview of the fiduciary duties of the BNSF Board in connection with its consideration of the contemplated merger, and reviewed with the BNSF Board the terms of the contemplated merger agreement. Representatives of Mayer Brown provided a regulatory analysis with respect to the contemplated merger. Representatives of Goldman Sachs and Evercore each presented to the BNSF Board their respective financial analyses with respect to the contemplated merger. Upon conclusion of their respective presentations, Goldman Sachs delivered its oral opinion, which was subsequently confirmed in writing, that as of such date and based upon and subject to the factors and assumptions set forth therein, the stock consideration and cash consideration, taken in the aggregate, to be paid to the holders (other than Berkshire and its affiliates) of the outstanding shares of BNSF common stock pursuant to the merger agreement was fair from a financial point of view to such holders, and Evercore delivered its oral opinion, which was subsequently confirmed in writing, that as of such date and based upon and subject to the assumptions, limitations, qualifications and other matters set forth therein, the merger consideration was fair, from a financial point of view, to the holders (other than Berkshire and its affiliates) of shares of BNSF common stock entitled to receive such consideration.

The BNSF Board again considered whether to contact other potential acquirors to solicit interest for an acquisition of BNSF. The BNSF Board also considered the discussions with representatives of Goldman Sachs and Evercore regarding a superior proposal from certain other strategic buyers being unlikely to be accretive, except for an acquisition that, in the view of counsel advising the BNSF Board, would present substantial regulatory issues. The BNSF Board also again considered the discussions with representatives of Goldman Sachs and Evercore with respect to the current state of the financial markets and the effect that current financial market conditions, together with BNSF’s market capitalization, would have on the possibility of a superior proposal by a private equity buyer being made. Finally, the BNSF Board also considered the terms of the merger agreement that would allow BNSF to entertain certain third party bids following the execution and announcement of the merger agreement, including the relatively low break-up fee that would be payable in the event the BNSF Board were to pursue an alternative proposal that was superior to the merger with Berkshire.

After engaging in extensive discussion, the BNSF Board unanimously approved the merger agreement as being in the best interests of BNSF and its stockholders and unanimously authorized the execution and delivery of the merger agreement.

On the afternoon of November 2, 2009, the Berkshire Board met by telephone. Mr. Buffett described the contemplated transaction and the terms of the merger agreement that had been negotiated. He described the desirability of splitting the Berkshire Class B common stock on a 50-for-1 basis to enable the BNSF stockholders and holders of equity awards to obtain more Berkshire common stock instead of cash for fractional shares, and the desirability of permitting the rollover of certain outstanding BNSF equity awards as contemplated by the

 

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merger agreement. After discussion, the Berkshire Board unanimously approved the merger agreement, and approved recommending a 50-for-1 stock split to the stockholders of Berkshire at a Berkshire stockholder meeting to be called for this purpose.

That evening, BNSF and Berkshire executed the merger agreement.

On the morning of November 3, 2009, prior to the commencement of trading on the NYSE, BNSF and Berkshire issued a joint press release announcing the transaction and their execution of a definitive merger agreement.

Recommendation of the BNSF Board and its Reasons for the Merger

The BNSF Board has unanimously approved the merger agreement, declared its advisability and determined that the merger agreement and the transactions contemplated by it are fair to and in the best interests of BNSF and its stockholders. Accordingly, the BNSF Board unanimously recommends that BNSF stockholders vote “FOR” the adoption of the merger agreement.

In reaching its decision to approve the merger agreement, the BNSF Board consulted with management, as well as BNSF’s legal and financial advisors, and considered a variety of factors weighing in favor of or relevant to the merger, including, without limitation, those described below.

Strategic Considerations

The BNSF Board considered a number of strategic aspects of the merger, including, but not limited to, the following factors:

 

•

BNSF’s business, results of operations, financial condition, earnings and return to stockholders on a historical and prospective basis, and its evaluation of BNSF’s business plan and the risks and benefits associated with the implementation of that plan compared to the risks and benefits associated with the merger;

 

•

Berkshire’s business, results of operations, financial condition, earnings and return to stockholders on a historical and prospective basis, including, but not limited to, the potential for growth, development and profitability of Berkshire;

 

•

the then-current financial market conditions and historical market prices, volatility and trading information with respect to the common stock of each of BNSF and Berkshire; and

 

•

whether there were other potential parties that might have an interest in and be financially capable of engaging in an alternative strategic transaction with BNSF, and the valuation, regulatory and financing issues that might arise in connection with pursuing an alternative strategic transaction.

Financial Considerations

The BNSF Board considered a number of financial aspects of the merger, including, but not limited to, the following factors:

 

•

the fact that the merger consideration represented a premium of 32.8% to the closing price for shares of BNSF common stock on October 30, 2009, the last trading day prior to the date of execution of the merger agreement, and a premium of 36.9% to the average closing price for shares of BNSF common stock over the twelve month period ended October 30, 2009;

 

•

the respective financial analyses of each of Goldman Sachs and Evercore, BNSF’s financial advisors in connection with the merger, and the respective opinions of each of Goldman Sachs and Evercore to the BNSF Board, each dated as of November 2, 2009. The opinion of Goldman Sachs stated that as of such date and based upon and subject to the factors and assumptions set forth therein, the stock consideration

 

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and the cash consideration, taken in the aggregate, to be paid to the holder (other than Berkshire and its affiliates) of the outstanding shares of BNSF common stock, was fair from a financial point of view to such holders. The opinion of Evercore stated that, as of that date and based upon and subject to the assumptions, limitations, qualifications and other matters set forth in its opinion letter, the merger consideration was fair, from a financial point of view, to the holders (other than Berkshire and its affiliates) of the shares of BNSF common stock entitled to receive such consideration;

 

•

the ability of BNSF stockholders to receive either cash, shares of Berkshire common stock or a combination of cash and shares of Berkshire common stock in the proposed merger, subject to any proration or reallocation necessary to achieve as closely as practicable the 60/40 cash-stock split with respect to the aggregate merger consideration;

 

•

the protection afforded by the collar mechanism to BNSF stockholders receiving Berkshire common stock in the proposed merger against significant fluctuations in the value of such stock; and

 

•

the opportunity for BNSF stockholders who elect to receive shares of Berkshire common stock in the merger to participate in the continued growth and other opportunities of Berkshire.

Other Considerations

The BNSF Board also considered a number of other aspects of the merger, including, but not limited to, the following factors:

 

•

the terms and conditions of the merger agreement, including, but not limited to, the representations, warranties and covenants of the parties, the conditions to closing, the form and structure of the merger consideration, and the ability of BNSF or the BNSF Board, as the case may be, to entertain competing transaction proposals, withdraw its approval or recommendation with respect to the merger agreement, or terminate the merger agreement in certain circumstances, subject, in each case, to compliance with certain procedural requirements, which may include the payment of a break-up fee;

 

•

the fact that the break-up fee described above is approximately equal to 1% of the equity value of BNSF (based on the assumed merger consideration of $100.00 per share), calculated excluding shares owned by Berkshire or its affiliates, which break-up fee the BNSF Board did not believe would preclude any other party from making a competing proposal for BNSF;

 

•

the fact that the terms of the merger agreement were determined through negotiations between BNSF, with the advice of its advisors, and Berkshire, with the advice of its outside counsel;

 

•

Berkshire’s track record in successfully acquiring other companies, and Berkshire’s agreements in the merger agreement to use its reasonable best efforts to consummate the proposed merger (subject to the terms and conditions of the merger agreement);

 

•

the expectation that the merger is expected to qualify as a tax-free “reorganization” pursuant to Section 368(a) of the Code;

 

•

the fact that some of BNSF’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of BNSF stockholders generally, including the treatment of BNSF stock options and restricted stock units held by such directors and executive officers in the merger and Berkshire’s agreement to indemnify BNSF directors and officers against certain claims and liabilities;

 

•

the regulatory and other government approvals required in connection with the merger, and the likelihood that such approvals will be obtained without unacceptable conditions;

 

•

the ability of the parties to consummate the merger, including the fact that Berkshire’s obligation to complete the merger is not conditioned upon receipt of financing; and

 

•

the commitment made by Mr. Buffett to vote all Berkshire common stock owned by him in favor of the Berkshire stockholder approval necessary to effect the stock split in respect of the Berkshire Class B common stock, so as to facilitate the merger and related transactions.

 

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Potential Risks

The BNSF Board also identified and considered potential risks and disadvantages associated with the merger agreement and the transactions contemplated by it, including, but not limited to, the following:

 

•

the possibility that the consummation of the merger may be delayed or not occur at all, and the adverse impact such event would have on BNSF and its business;

 

•

the possibility that, notwithstanding the size of the collar mechanism, shares of Berkshire Class A common stock might trade outside the collar, in which case the value of the stock portion of the merger consideration would be different from the cash portion of the merger consideration;

 

•

the possibility that the proration and reallocation provisions of the merger agreement might result in BNSF stockholders receiving a combination of merger consideration different from that which they elected;

 

•

the risk of incurring substantial expenses related to the merger;

 

•

the possible disruption to BNSF’s business that may result from announcement of the merger and the resulting distraction of management’s attention from the day-to-day operations of the business;

 

•

the risk that the pendency of the merger could materially adversely affect BNSF’s relationships with its customers, suppliers and any other persons with whom BNSF has a business relationship, or pose difficulties in attracting and retaining key employees; and

 

•

the other potential risks described in the section titled “Risk Factors” beginning on page 26 of this proxy statement/prospectus.

The above discussion of the information and factors considered by the BNSF Board includes the principal information and factors, both positive and negative, considered by the BNSF Board, but is not intended to be exhaustive and may not include all of the information and factors considered by the BNSF Board. The above factors are not presented in any order of priority. In view of the variety of factors considered in connection with its evaluation, the BNSF Board did not quantify or assign relative or specific weights to the factors considered in reaching its conclusion that the merger agreement is advisable and in the best interests of BNSF and its stockholders. Rather, the BNSF Board views its position and recommendation as being based on the totality of the information presented to and considered by it. In addition, individual members of the BNSF Board may have given different weights to different factors. It should be noted that this explanation of the reasoning of the BNSF Board and certain information presented in this section is forward-looking in nature and should be read in light of the factors discussed in the section titled “Forward-Looking Statements” beginning on page 30 of this proxy statement/prospectus.

Management Cases

Every September, the BNSF Board conducts a multi-day meeting to consider long range issues impacting BNSF, as well as a review of normal business activity. As part of this meeting, management presents a long range plan, typically looking out five years and, depending upon circumstances, considering multiple scenarios. These long range plans are the result of a several-month exercise by BNSF management, where risks, opportunities and strategies are discussed and debated. On September 24, 2009, the BNSF Board was presented with four scenarios for the period 2010 through 2014. Each case considered a different set of economic conditions as well as level of freight volume, revenue per unit (“RPU”), costs and efficiency. These scenarios were described as (i) the 2010 Recovery Case, which assumed economic recovery occurring in mid-2010, and assumed the highest RPU and unit growth and operational efficiency improvements, (ii) the 2011 Recovery Case, which assumed economic recovery occurring in mid-2011, and assumed slightly lower RPU growth, unit growth and operational efficiency improvements, (iii) the No Recovery Case, which assumed a flat unit growth rate over the five-year forecast period, as well as low RPU growth and small operational efficiency improvements, and (iv) the Deeper Recession Case, which assumed a general worsening of economic conditions over the five-year forecast period, and also assumed low RPU growth, a slight unit decline and small operational efficiency improvements. Due to the current economic conditions, the BNSF Board had reviewed scenarios similar to the first three at their July meeting and requested that a fourth case be developed. These cases have not been shared by BNSF with Berkshire and have not been discussed by Messrs. Rose and Buffett.

 

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Berkshire’s Reasons for the Merger

In deciding to acquire BNSF, Berkshire is making a big bet on the economic future of the United States. Berkshire believes that the future prosperity of the United States depends on its having an efficient and well-maintained rail system while, at the same time, the country’s economy must grow and prosper for railroads to do well.

Berkshire believes that railroads are an efficient and environmentally friendly way to move freight around the country. It also believes that BNSF, in particular, is a leader in the rail industry in the areas of innovative equipment and technology. Furthermore, Berkshire is very impressed with BNSF’s management team, including Chief Executive Officer Matthew Rose, and it intends to rely on them to manage the surviving entity following the merger.

Opinions of BNSF’s Financial Advisors

Opinion of Goldman Sachs

Goldman Sachs delivered its opinion to the BNSF Board that, as of November 2, 2009, and based upon and subject to the factors and assumptions set forth therein, the stock consideration and the cash consideration, taken in the aggregate, to be paid to the holders (other than Berkshire and its affiliates) of the outstanding shares of BNSF common stock, pursuant to the merger agreement was fair from a financial point of view to such stockholders.

The full text of the written opinion of Goldman Sachs, dated November 2, 2009, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement/prospectus. Goldman Sachs provided its opinion for the information and assistance of the BNSF Board in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of BNSF common stock should vote or make an election with respect to the merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

•

the merger agreement;

 

•

annual reports to stockholders and Annual Reports on Form 10-K of BNSF and Berkshire for the five fiscal years ended December 31, 2008;

 

•

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of BNSF and Berkshire;

 

•

certain other communications from BNSF and Berkshire to their respective stockholders;

 

•

certain publicly available research analyst reports for BNSF and Berkshire; and

 

•

certain internal financial analyses and BNSF’s 2010 Recovery Case, 2011 Recovery Case, No Recovery Case and Deeper Recession Case, which were prepared by its management and approved by BNSF for use by Goldman Sachs.

Goldman Sachs was directed by BNSF to assume that the 2011 Recovery Case is more likely than the other forecasts prepared by BNSF management. The management of Berkshire did not make available any forecasts of the future financial performance of Berkshire. With the consent of BNSF, Goldman Sachs’ review of the future financial performance of Berkshire was limited to Goldman Sachs’ discussions with the management of Berkshire regarding the publicly available estimates of a certain research analyst, as well as current consensus forecasts of Berkshire.

Goldman Sachs also held discussions with members of the senior managements of BNSF and Berkshire regarding their assessment of the strategic rationale for, and the potential benefits of, the merger and the past and current business operations, financial condition and future prospects of their respective companies. In addition,

 

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Goldman Sachs reviewed the reported price and trading activity for the shares of BNSF common stock, the shares of Berkshire Class A common stock and the shares of Berkshire Class B common stock, compared certain financial and stock market information for BNSF and Berkshire with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the transportation and rail industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as Goldman Sachs considered appropriate.

For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by Goldman Sachs, and did not assume any liability for any such information. In that regard, Goldman Sachs assumed with BNSF’s consent that the 2011 Recovery Case has been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of BNSF. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of BNSF or Berkshire or any of their respective subsidiaries, nor was any such evaluation or appraisal furnished to Goldman Sachs. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on BNSF or Berkshire or on the expected benefits of the merger in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs also assumed that the merger will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs did not express any opinion as to the impact of the merger on the solvency or viability of BNSF or Berkshire or the ability of BNSF or Berkshire to pay its obligations when they come due. In addition, Goldman Sachs’ opinion did not address any legal, regulatory, tax or accounting matters nor did it address the underlying business decision of BNSF to engage in the merger or the relative merits of the merger as compared to any strategic alternatives that may be available to BNSF. Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, BNSF or any other alternative transaction. Goldman Sachs’ opinion addressed only the fairness from a financial point of view, as of the date of the opinion, to the holders (other than Berkshire and its affiliates) of the outstanding shares of BNSF common stock of the stock consideration and the cash consideration, taken in the aggregate, to be paid to the holders of shares of BNSF common stock pursuant to the merger agreement. Goldman Sachs did not express any view on, and its opinion did not address, any other term or aspect of the merger agreement or merger (including the proration and certain other procedures and limitations contained in the merger agreement with respect to shares of BNSF common stock for which stockholders elect to receive cash consideration or stock consideration, or make no election) or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger, including, without limitation, the fairness of the merger to, or any consideration received in connection therewith by, the holders of any class of securities, creditors, or other constituencies of BNSF; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of BNSF, or any class of such persons, in connection with the merger, whether relative to the stock consideration and the cash consideration, taken in the aggregate, to be paid to the holders of shares of BNSF common stock pursuant to the merger agreement or otherwise. Goldman Sachs did not express any opinion as to the prices at which shares of Berkshire Class A common stock or shares of Berkshire Class B common stock will trade at any time. Goldman Sachs’ opinion necessarily was based on economic, monetary, market and other conditions as in effect on, and the information made available to Goldman Sachs as of, the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs’ advisory services and the opinion of Goldman Sachs were provided for the information and assistance of the BNSF Board in connection with its consideration of the merger and such opinion does not constitute a recommendation as to how any holder of BNSF common stock should vote or make an election with respect to such merger or any other matter.

 

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The following is a summary of the material financial analyses delivered by Goldman Sachs to the BNSF Board in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 2, 2009, and is not necessarily indicative of current market conditions.

Premia Paid Analysis. For all acquisition transactions announced between 2004 and 2009 involving the sale of U.S. targets for aggregate consideration greater than $10 billion, Goldman Sachs calculated the median percentage premia of the consideration paid to the target’s closing price on the trading day immediately preceding the date of announcement (the “1-Day Prior Premium”) and the median percentage premia of the consideration paid to the target’s closing price on the trading day four weeks preceding the date of announcement (the “4-Week Prior Premium”). This analysis did not include transactions involving the purchase of less than 25% of a company’s ownership interest, and did not include the sale of Wachovia Corporation to Wells Fargo & Company or the sale of The Bear Stearns Companies Inc. to JPMorgan Chase & Co. The following is the result of this analysis:

 

•

In 2004, the median 1-Day Prior Premium was 16.5% and the median 4-Week Prior Premium was 35.8%;

 

•

In 2005, the median 1-Day Prior Premium was 17.6% and the median 4-Week Prior Premium was 22.9%;

 

•

In 2006, the median 1-Day Prior Premium was 17.9% and the median 4-Week Prior Premium was 20.7%;

 

•

In 2007, the median 1-Day Prior Premium was 19.9% and the median 4-Week Prior Premium was 22.4%;

 

•

In 2008, the median 1-Day Prior Premium was 30.6% and the median 4-Week Prior Premium was 27.3%; and

 

•

In 2009 (through October 30, 2009), the median 1-Day Prior Premium was 31.6% and the 4-Week Prior Premium was 38.9%.

Goldman Sachs also analyzed the $100.00 implied per share value of each of the cash consideration and the stock consideration to be paid to holders of shares of BNSF common stock pursuant to the merger agreement in relation to the closing price of shares of BNSF common stock on October 30, 2009, the last trading day prior to the date on which the BNSF Board adopted a resolution approving the merger agreement, the high and low prices of shares of BNSF common stock for the 52-week period ended October 30, 2009, and the all-time high price of shares of BNSF common stock. Goldman Sachs also analyzed the $100.00 implied per share value of each of the cash consideration and the stock consideration to be paid to the holders of shares of BNSF common stock pursuant to the merger agreement in relation to the average market prices of shares of BNSF common stock during the one-week, 30-day, six-month, one-year, two-year and five-year periods ended October 30, 2009.

 

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The following table presents the results of this analysis:

 

		Value			Premium
Premium Analysis
Premium to 10-30-09 close		$	75.32		32.8	%
Premium to 1-week average			76.58		30.6
Premium to 52-week high			91.60		9.2
Premium to 52-week low			51.20		95.3
Premium to 30-day average			81.20		23.1
Premium to 6-month average			77.61		28.9
Premium to 1-year average			73.06		36.9
Premium to 2-year average			83.13		20.3
Premium to 5-year average			74.64		34.0
Premium to all-time high			114.56		(12.7	)

Analysis of Multiples at Offer Price. Goldman Sachs calculated and compared various financial multiples and ratios for BNSF based on information that it obtained from BNSF management and estimates from the Institutional Brokers Estimate System (“IBES”):

 

•

Ratios of the implied enterprise value (“EV”) of BNSF on October 30, 2009 (computed by adding BNSF’s net debt of $9.224 billion to an implied equity value on October 30, 2009 of $25.928 billion) to BNSF’s estimated earnings before interest, taxes, depreciation and amortization (“EBITDA”) for 2010;

 

•

Ratios of the implied EV paid for BNSF in the merger (computed by adding BNSF’s net debt of $9.224 billion to the implied aggregate value of the cash consideration and the stock consideration to be received by holders of shares of BNSF common stock in the merger of $34.623 billion) to BNSF’s estimated EBITDA for 2010;

 

•

Ratios of the closing price per share of BNSF common stock on October 30, 2009 to BNSF’s estimated earnings per share (“EPS”) for 2010; and

 

•

Ratios of the $100.00 implied per share value of the cash consideration and the stock consideration to be received by holders of shares of BNSF common stock in the merger to BNSF’s estimated EPS for 2010.

The following table presents the results of this analysis:

 

		As of October 30, 2009			Implied Consideration Value
Enterprise Value/2010E EBITDA
IBES		6.8	x		8.5	x
2010 Recovery Case		7.0			8.7
2011 Recovery Case		7.4			9.3
No Recovery Case Deeper Recession Case		7.6 8.0			9.5 10.0
Price/2010E EPS
IBES		13.5	x		17.9	x
2010 Recovery Case		14.9			19.8
2011 Recovery Case		17.1			22.7
No Recovery Case Deeper Recession Case		17.6 19.7			23.4 26.2

 

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Illustrative Present Value of Future Stock Price Analyses. Goldman Sachs performed illustrative analyses of the present value of the future price of shares of BNSF common stock using BNSF management’s 2010 Recovery Case, 2011 Recovery Case, No Recovery Case and Deeper Recession Case estimates of BNSF’s EPS for each year between 2011 and 2014. Management of BNSF directed Goldman Sachs to assume that the 2011 Recovery Case is more likely than BNSF’s other forecasts prepared by BNSF management. Goldman Sachs first multiplied such EPS estimates by price/earnings multiples ranging from 9.5x-17.5x. Goldman Sachs then calculated the present values of the implied per share future values, including the present value of the future dividend payments, for shares of BNSF common stock by discounting the implied per share future values to December 31, 2009 (the assumed date of the merger for purposes of this analysis), using discount rates ranging from 8%-12%, reflecting estimates of BNSF’s cost of equity. The following tables present the results of this analysis:

 

Year		2011 Recovery Case (Implied Present Value)		2010 Recovery Case (Implied Present Value)		No Recovery Case (Implied Present Value)		Deeper Recession Case (Implied Present Value)
2011E		$47.55 — $89.51		$59.85 — $113.01		$40.93 — $76.87		$33.21 — $62.13
2012E		54.07 — 104.27		66.71 —   129.33		39.71 —   76.00		31.60 —   59.95
2013E		59.44 — 117.49		70.33 —   139.86		37.42 —   72.87		30.32 —   58.29
2014E		62.84 — 127.19		72.56 —   147.90		35.68 —   70.67		29.52 —   57.55

Goldman Sachs also performed illustrative analyses of the present value of the future price of shares of BNSF common stock using BNSF management’s 2010 Recovery Case, 2011 Recovery Case, No Recovery Case and Deeper Recession Case estimates of BNSF’s EBITDA for each year between 2011 and 2014. Management of BNSF directed Goldman Sachs to assume that the 2011 Recovery Case is more likely than BNSF’s other forecasts prepared by BNSF management. Goldman Sachs first multiplied such EBITDA estimates by EV/EBITDA multiples ranging from 5.5x-9.5x and next subtracted the net debt estimates for each year between 2011 and 2014 using management’s 2011 Recovery Case estimates. Goldman Sachs then calculated the present values of the implied per share future values for shares of BNSF common stock by discounting the implied per share future values to December 31, 2009 (the assumed date of the merger for purposes of this analysis), using discount rates ranging from 8%-12%. The following table presents the results of this analysis:

 

Year		2011 Recovery Case (Implied Present Value)		2010 Recovery Case (Implied Present Value)		No Recovery Case (Implied Present Value)		Deeper Recession Case (Implied Present Value)
2011E		$50.68 — $106.97		$56.25 — $123.01		$46.72 — $97.72		$39.44 — $84.94
2012E		52.88 —   117.30		60.12 —   137.77		44.73 —   96.26		38.63 —   83.32
2013E		57.13 —   130.75		63.48 —   149.41		43.52 —   95.43		38.19 —   82.41
2014E		58.68 —   139.66		64.55 —   157.07		41.36 —   93.79		36.83 —   81.37

Discounted Cash Flow Analyses. Goldman Sachs performed illustrative discounted cash flow analyses on BNSF using BNSF management’s 2010 Recovery Case, 2011 Recovery Case, No Recovery Case and Deeper Recession Case estimates provided by BNSF’s management. Management of BNSF directed Goldman Sachs to assume that the 2011 Recovery Case is more likely than BNSF’s other forecasts prepared by BNSF management. Goldman Sachs performed discounted cash flow analyses to generate reference ranges for the implied present value per share of BNSF by calculating the total present value of the estimated free cash flows for the period beginning December 31, 2010 and ending on December 31, 2014 using discount rates ranging from 7.0% to 11.0%, reflecting estimates of BNSF’s weighted average cost of capital. Goldman Sachs then calculated the present value of BNSF’s terminal value at December 31, 2014 by applying a range of enterprise value/EBITDA multiples of 5.5x to 9.5x to BNSF’s estimated 2014 EBITDA and using discount rates ranging from 7.0% to 11.0%. Goldman Sachs then calculated the implied value per share of BNSF common stock by adding the present value of the five years of projected cash flows beginning from December 31, 2010 to the present value of BNSF’s terminal value at December 31, 2014. This analysis resulted in a range of illustrative implied present values of $62.38 to $136.97 per share of BNSF common stock for the 2011 Recovery Case, $71.04 to $151.36 per share of BNSF common stock for the 2010 Recovery Case, $39.61 to $95.12 per share of BNSF common

 

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stock for the No Recovery Case and $33.08 to $84.36 per share of BNSF common stock for the Deeper Recession Case.

Goldman Sachs also performed a similar discounted cash flow analysis on BNSF using BNSF management’s 2010 Recovery Case, 2011 Recovery Case, No Recovery Case and Deeper Recession Case estimates provided by BNSF’s management and discount rates ranging from 7.0% to 11.0%, but using terminal values based on a perpetuity growth rate ranging from 1.5% to 3.5%. Management of BNSF directed Goldman Sachs to assume that the 2011 Recovery Case is more likely than BNSF’s other forecasts prepared by BNSF management. This analysis resulted in a range of illustrative implied present values of $42.32 to $153.54 per share of BNSF common stock for the 2011 Recovery Case, $51.91 to $176.14 per share of BNSF common stock for the 2010 Recovery Case, $20.89 to $94.81 per share of BNSF common stock for the No Recovery Case and $14.45 to $79.66 per share of BNSF common stock for the Deeper Recession Case.

Historical Exchange Ratio Analysis. Goldman Sachs calculated the average historical exchange ratios of shares of BNSF common stock to shares of Berkshire Class A common stock based on the closing prices of shares of BNSF common stock (after multiplying the closing prices of the shares of BNSF common stock by 1000 for illustrative purposes) and shares of Berkshire Class A common stock during the 3-month, 6-month, 1-year and 5-year periods ended October 30, 2009. Goldman Sachs also calculated the minimum, maximum and median exchange ratios of shares of BNSF common stock to shares of Berkshire Class A common stock during the 5-year period ended October 30, 2009. The following table presents the results of this analysis:

 

Statistic		Value
Minimum		0.49x
Maximum		1.00x
Median		0.74x
3-Month Average		0.82x
6-Month Average		0.80x
1-Year Average		0.78x
5-Year Average		0.73x

Ratio of Price to Book Value Per Share. Goldman Sachs calculated the current ratio as well as the average historical ratios of closing prices of shares of Berkshire Class A common stock to the book values per share of shares of Berkshire common stock reported by Berkshire during the 3-month, 6-month, 1-year, 5-year and 10-year periods ended October 30, 2009. Goldman Sachs also calculated the minimum, maximum and median ratios of closing prices of shares of Berkshire Class A common stock to book values per share of shares of Berkshire common stock reported by Berkshire during the 10-year period ended October 30, 2009. Goldman Sachs noted that the current ratio was equal to or below the average historical ratios for all of the calculated periods. The following table presents the results of this analysis:

 

Statistic		Value
Current		1.3x
Minimum		1.0x
Maximum		2.0x
Median		1.6x
3-Month Average		1.4x
6-Month Average		1.3x
1-Year Average		1.3x
5-Year Average		1.5x
10-year Average		1.6x

 

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Precedent Domestic Rail Transactions Analysis. Goldman Sachs analyzed certain information relating to the following transactions in the domestic rail industry:

 

•

BNSF’s acquisition of Canadian National Railway Company announced in December 1999, which was never consummated;

 

•

Canadian National Railway Company’s acquisition of Illinois Central Corporation announced in February 1998;

 

•

The acquisition of Conrail Inc. by Norfolk Southern Corporation and CSX Corporation announced in April 1997;

 

•

Union Pacific Corporation’s acquisition of Southern Pacific Rail Corporation announced in August 1995;

 

•

Union Pacific Corporation’s acquisition of 70.9% of the common stock of Chicago & North Western Transportation Company announced in March 1995; and

 

•

Burlington Northern Inc.’s acquisition of Santa Fe Pacific Corporation announced in June 1994.

For each of the selected transactions, Goldman Sachs calculated and compared enterprise value based on the implied transaction price as a multiple of the target’s last twelve months (“LTM”) EBITDA. For each of the selected transactions, Goldman Sachs also analyzed the target’s LTM operating ratio, the estimated annual pre-tax synergies resulting from the transaction and the synergy adjusted enterprise value based on the implied transaction price as a multiple of LTM EBITDA. While none of the selected transactions or the selected companies that participated in the selected transactions are directly comparable to the proposed merger, including because the most recent precedent domestic rail transaction was consummated approximately 10 years ago, or BNSF, the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of BNSF’s results, market size and product profile.

 

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The analysis indicated that the range of synergy adjusted EV/LTM EBITDA for the selected transactions was 4.3x-7.5x, and the range of EV/LTM EBITDA for the selected transactions was 6.7x-12.6x, with a median value of 8.9x. Goldman Sachs noted that the EV/EBITDA multiple for the proposed merger was consistent with the median value for the precedent domestic rail transactions. The following table presents the other results of this analysis:

 

Announced Date		Acquiror		Target		Enterprise Value (in millions)			Target LTM Operating Ratio			Estimated Annual Pre-tax Synergies (in millions)
Dec-1999		BNSF		Canadian National Railway Company		$	8,955		65.9	%		$	560
Feb-1998		Canadian National Railway Company		Illinois Central Corporation			2,991		63.4				300
April-1997		Norfolk Southern/ CSX		Conrail Inc.			12,451		79.0				650/550
Aug-1995		Union Pacific		Southern Pacific Rail Corporation			5,500		96.7				500
Mar-1995		Union Pacific		Chicago & North Western			2,611		80.0				N/A
Jan-1995		Burlington Northern		Santa Fe Pacific			5,105		82.7				560

Selected Heavy Asset Transactions Analysis. Goldman Sachs analyzed certain information relating to the following selected heavy asset mergers and acquisitions transactions in the three years ended October 23, 2009:

 

•

One Equity Partners, LLC’s acquisition of Constantia Packaging AG announced in October 2009;

 

•

American Securities LLC’s acquisition of GenTek Inc. announced in September 2009;

 

•

Royal Boskalis Westminster N.V.’s acquisition of Smit Internationale N.V. announced in September 2008 but never consummated;

 

•

Liberty Shipping Group LLC’s acquisition of International Shipholding Corporation announced in September 2008 but never consummated;

 

•

Ingersoll-Rand Company Limited’s acquisition of Trane Inc. announced in December 2007;

 

•

Berkshire’s acquisition of Marmon Holdings, Inc. announced in December 2007;

 

•

Eaton Corporation’s acquisition of Moeller Holding GmbH & Co. KG announced in December 2007;

 

•

Cerberus Capital Management, LP’s acquisition of United Rentals Inc. announced in July 2007 but never consummated;

 

•

Platinum Equity, LLC’s acquisition of Ryerson Inc. announced in July 2007;

 

•

Doosan Infracore Co, Ltd.’s acquisition of Bobcat Company announced in July 2007;

 

•

Onex Corp. and the Carlyle Group, L.P.’s acquisition of Allison Transmission, Inc. announced in June 2007;

 

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•

Bucyrus International, Inc.’s acquisition of DBT GmbH announced in December 2006; and

 

•

Oshkosh Truck Corporation’s acquisition of JLG Industries, Inc. announced in October 2006.

For each of the selected transactions, Goldman Sachs calculated and compared enterprise value based on the implied transaction price as a multiple of the target’s LTM EBITDA. While none of the selected transactions or the companies that participated in the selected transactions are directly comparable to the proposed merger or BNSF, the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of BNSF’s results, market size and product profile.

The results of this analysis indicated that the range of EV/LTM EBITDA for these transactions was 4.5x-13.2x, with a mean value of 7.7x and a median value of 7.9x. Goldman Sachs noted that the EV/EBITDA multiple for the proposed merger was higher than the median value for the selected heavy asset transactions.

Selected Precedent Collar Analysis. Goldman Sachs analyzed the high and low collar prices for selected transactions since 2003 involving the sale of U.S. targets for aggregate consideration greater than $200 million and with a floating exchange rate collar provision. For each of these transactions, Goldman Sachs determined the stock price of the acquiror one day prior to the announcement of the transaction and measured the percentage above the acquiror’s high collar price and the percentage below the acquiror’s low collar price.

The table below presents the results of this analysis:

 

Target		Acquiror		Date Announced		Collar Price High			Collar Price Low			Acquiror Stock Price 1 Day Prior			% Above Acquiror Stock Price 1 Day Prior			% Below Acquiror Stock Price 1 Day Prior
ICT Group, Inc.		Sykes Enterprises, Incorporated		10/6/2009		$	22.47		$	19.33		$	20.15		11	%		-4	%
Data Domain, Inc.		NetApp Inc.		5/20/2009			21.27			17.41			18.07		18			-4
Lev Pharmaceuticals, Inc.		ViroPharma Incorporated		7/15/2008			15.68			10.03			12.54		25			-20
Corn Products International, Inc.		Bunge Limited		6/23/2008			133.10			108.90			122.17		9			-11
Hilb, Rogal and Hobbs Company		Willis Group Holdings Limited		6/8/2008			40.04			31.46			35.88		12			-12
ProCentury Corporation		Meadowbrook Insurance Group		2/20/2008			10.50			8.00			8.94		17			-11
CSK Auto Corporation		O’Reilly Automotive, Inc.		2/1/2008			29.95			25.67			29.43		2			-13
Greater Bay Bancorp		Wells Fargo & Company		5/4/2007			39.33			32.18			35.84		10			-10
Placer Sierra Bancshares		Wells Fargo & Company		1/9/2007			39.82			32.58			35.50		12			-8
Solexa, Inc.		Illumina, Inc.		11/13/2006			47.30			40.70			44.05		7			-8
Windrose Medical Properties Trust		Health Care REIT, Inc.		9/13/2006			40.05			38.84			40.05		0			-3

 

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Target		Acquiror		Date Announced		Collar Price High		Collar Price Low		Acquiror Stock Price 1 Day Prior		% Above Acquiror Stock Price 1 Day Prior		% Below Acquiror Stock Price 1 Day Prior
International DisplayWorks, Inc.		Flextronics International Ltd.		9/5/2006		13.49		10.56		11.77		15		-10
Earle M. Jorgensen Company		Reliance Steel & Aluminum Co.		1/17/2006		72.86		53.86		64.80		12		-17
Foothill Independent Bancorp		First Community Bancorp		12/15/2005		59.03		45.91		53.32		11		-14
Guidant Corporation		Boston Scientific Corporation		12/5/2005		28.86		22.62		27.33		6		-17
Engineered Support Systems, Inc.		DRS Technologies, Inc.		9/22/2005		57.20		46.80		48.00		19		-3
Maytag Corporation		Whirlpool Corporation		7/17/2005		91.79		75.10		70.41		30		7
MCI, Inc.		Qwest Communications Intl.		2/24/2005		4.15		3.32		4.05		2		-18
International Steel Group Inc.		Ispat International N.V.		10/25/2004		43.81		34.50		25.34		73		36
Province Healthcare Company		LifePoint Hospitals, Inc.		8/16/2004		39.00		33.00		32.74		19		1
Millennium Chemicals Inc.		Lyondell Chemical Company		3/29/2004		20.50		16.50		15.62		31		6
ILEX Oncology, Inc.		Genzyme Corporation		2/26/2004		59.88		46.58		53.23		12		-12
Local Financial Corporation		International Bancshares Corp.		1/22/2004		44.80		36.80		51.10		-12		-28
Neuberger Berman Inc.		Lehman Brothers Holdings Inc.		7/22/2003		90.42		66.51		64.50		40		3
OfficeMax Incorporated		Boise Cascade Corporation		7/14/2003		25.77		21.09		23.43		10		-10
										Median Average		12.4% 14.7%		-10.4%   -8.5%

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after

 

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considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to BNSF or Berkshire or the contemplated merger.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs providing its opinion to the BNSF Board as to the fairness from a financial point of view, as of the date of the opinion, to the holders (other than Berkshire and its affiliates) of the outstanding shares of BNSF common stock of the stock consideration and the cash consideration, taken in the aggregate, to be paid to such holders pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of BNSF, Berkshire, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration was determined through arms’-length negotiations between BNSF and Berkshire and was approved by the BNSF Board. Goldman Sachs provided advice to BNSF during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to BNSF or the BNSF Board or that any specific amount of consideration constituted the only appropriate consideration for the merger.

As described above, Goldman Sachs’ opinion to the BNSF Board was one of many factors taken into consideration by the BNSF Board in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex C to this proxy statement/prospectus.

Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, commercial banking, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of third parties, BNSF, Berkshire and any of their respective affiliates or any currency or commodity that may be involved in the merger for their own account and for the accounts of their customers. Goldman Sachs acted as financial advisor to BNSF in connection with, and participated in certain of the negotiations leading to, the merger. In addition, Goldman Sachs has provided certain investment banking and other financial services to BNSF and its affiliates from time to time, including having acted as joint-lead manager with respect to an offering by BNSF of its 6.150% Global Debentures due 2037 (aggregate principal amount $650,000,000) and its 5.650% Global Debentures due 2017 (aggregate principal amount $650,000,000) in April 2007; as a joint bookrunner with respect to an offering by BNSF of its 7.00% Notes due 2014 (aggregate principal amount $500,000,000) in November 2008; and as a joint bookrunner with respect to an offering by BNSF of its 4.70% Notes due 2019 (aggregate principal amount $750,000,000) in September 2009. Goldman Sachs also has extensively provided and is currently providing certain investment banking and other financial services to Berkshire and its affiliates and portfolio companies, including, but not limited to, having acted as joint bookrunner with respect to an offering by PacifiCorp, a subsidiary of Berkshire, of its 5.75% First Mortgage Bonds due 2037 (aggregate principal amount $600,000,000) in March 2007; as sole bookrunner with respect to an offering by XTRA Finance Corporation, a subsidiary of Berkshire, of its 5.150% Senior Notes due 2017 (aggregate principal amount $400,000,000) in March 2007; as sole bookrunner with respect to an offering by Berkshire Hathaway Finance of its 5.125% Senior Notes due 2012 (aggregate principal amount $750,000,000) in December 2007; as sole bookrunner with respect to an offering by Berkshire Hathaway Finance of its 4.50% Senior Notes due 2013 (aggregate principal amount $500,000,000) and Floating Rate Notes due 2011 (aggregate principal amount $1,500,000,000) in March 2008; and as joint bookrunner with respect to an offering by Berkshire Hathaway Finance of its 4.00% Senior Notes due 2012

 

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(aggregate principal amount $750,000,000) and its 5.40% Senior Notes due 2018 (aggregate principal amount $250,000,000) in March 2009. Goldman Sachs may provide investment banking and other financial services to BNSF and to Berkshire and its portfolio companies and their respective affiliates in the future. In connection with the above-described services Goldman Sachs has received, and may receive, compensation. On October 1, 2008, affiliates of Berkshire purchased from The Goldman Sachs Group, Inc. 50,000 shares of 10% Cumulative Perpetual Preferred Stock, Series G of The Goldman Sachs Group, Inc. (aggregate liquidation preference $5,000,000,000) and warrants to purchase 43,478,260 shares of common stock of The Goldman Sachs Group, Inc. at an exercise price of $115 per share. Goldman Sachs and its affiliates also have co-invested with Berkshire and its affiliates and portfolio companies from time to time and may do so in the future.

The BNSF Board engaged Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement, dated October 24, 2009, BNSF engaged Goldman Sachs to act as its financial advisor in connection with the merger. Pursuant to the terms of this engagement letter, BNSF has agreed to pay Goldman Sachs a transaction fee of approximately $35 million, all of which is contingent upon consummation of the merger. In addition, BNSF has agreed to reimburse Goldman Sachs for its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Opinion of Evercore

On November 2, 2009, at a meeting of the BNSF Board, Evercore delivered to the BNSF Board an oral opinion, which opinion was subsequently confirmed by delivery of a written opinion dated November 2, 2009, to the effect that, as of that date and based on and subject to assumptions made, matters considered and limitations on the scope of review undertaken by Evercore as set forth therein, the merger consideration was fair, from a financial point of view, to the holders (other than Berkshire and its affiliates) of the shares of BNSF common stock entitled to receive such merger consideration.

The full text of Evercore’s written opinion, dated November 2, 2009, which sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex D to this proxy statement/prospectus and is incorporated by reference in its entirety into this proxy statement/prospectus. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was directed to the BNSF Board and addresses only the fairness, from a financial point of view, of the merger consideration to the holders (other than Berkshire and its affiliates) of the shares of BNSF common stock entitled to receive such merger consideration. The opinion does not address any other aspect of the proposed merger and does not constitute a recommendation to any holder of BNSF common stock as to how such stockholder should vote or act with respect to any matters relating to the merger. Evercore’s opinion does not address the relative merits of the merger as compared to other business or financial strategies that might be available to BNSF, nor does it address the underlying business decision of BNSF to engage in the merger.

In connection with rendering its opinion, Evercore, among other things:

 

•

reviewed certain publicly available business and financial information relating to BNSF and Berkshire that it deemed to be relevant, including publicly available research analysts’ estimates;

 

•

reviewed certain non-public historical financial and operating data relating to BNSF prepared and furnished to it by management of BNSF;

 

•

reviewed certain non-public projected financial and operating data relating to BNSF under alternative business assumptions prepared and furnished to it by management of BNSF;

 

•

discussed the past and current operations, financial projections and current financial condition of BNSF with management of BNSF (including management’s views on the risks and uncertainties of achieving

 

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such projections) and discussed the past and current operations, current financial condition and certain forward-looking information of Berkshire with management of Berkshire;

 

•

reviewed the reported prices and the historical trading activity of BNSF common stock and Berkshire Class A common stock;

 

•

compared the financial performance of BNSF and Berkshire and their respective stock market trading multiples with those of certain other publicly traded companies and indices that it deemed relevant;

 

•

compared the financial performance of BNSF and the valuation multiples relating to the merger with those of certain other transactions that it deemed relevant;

 

•

reviewed the merger agreement; and

 

•

performed such other analyses and examinations and considered such other factors that it deemed appropriate.

For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of, the accuracy and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, and Evercore assumed no liability therefor. With respect to the projected financial data relating to BNSF referred to above and approved for Evercore’s use by BNSF, Evercore assumed that such projected financial data had been reasonably prepared on bases reflecting the best currently available assumptions, estimates and good faith judgments of management of BNSF as to the future financial performance of BNSF. Management of BNSF had informed Evercore that the 2011 Recovery Case was the most likely of the forecasts provided to Evercore. Evercore expressed no view as to any projected financial data relating to BNSF or the assumptions on which such projected financial data was based. Management of Berkshire did not provide Evercore with any forecasts or projections for Berkshire and Evercore’s discussions with Berkshire’s management with respect to potential future forecasts and projections were therefore limited to discussions of certain forward-looking information.

For purposes of rendering its opinion, Evercore assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement were true and correct, that each party would perform all of the covenants and agreements required to be performed by it under the merger agreement and that all conditions to the consummation of the merger would be satisfied without material waiver or modification thereof. Evercore further assumed that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the merger would be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on BNSF or the consummation of the merger or reduce the benefits to the holders of BNSF common stock of the merger in any respect material to its opinion.

Evercore did not make or assume any responsibility for making any independent valuation or appraisal of the assets or liabilities of BNSF, nor was Evercore furnished with any such appraisals. Evercore did not evaluate the solvency or fair value of BNSF under any state or Federal laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion was necessarily based upon information made available to it as of the date of its opinion and financial, economic, market and other conditions as they existed and as could be evaluated on the date of its opinion. It should be understood that subsequent developments may affect Evercore’s opinion and that Evercore has no obligation to update, revise or reaffirm its opinion.

Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness, from a financial point of view, of the merger consideration to the holders (other than Berkshire and its affiliates) of the shares of BNSF common stock entitled to receive such merger consideration. Evercore did not express any view on, and its opinion did not address, the fairness of the proposed transaction to, or any consideration received in connection therewith by, the holders of any other securities, creditors or other constituencies of BNSF, nor the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of BNSF, or any class of such persons, whether relative to the merger

 

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consideration or otherwise. Evercore assumed that any modification to the structure of the transaction would not vary such structure in any respect material to its analysis. Evercore’s opinion did not address the relative merits of the merger as compared to other business or financial strategies that might be available to BNSF, nor did Evercore’s opinion address the underlying business decision of BNSF to engage in the merger. In arriving at its opinion, Evercore was not authorized to solicit, and did not solicit, interest from any third party with respect to the acquisition of any or all of the BNSF common stock or any business combination or other extraordinary transaction involving BNSF. Evercore expressed no opinion as to the price at which shares of BNSF or Berkshire will trade at any time. Evercore’s opinion noted that Evercore is not a legal, regulatory, accounting or tax expert and that Evercore had assumed the accuracy and completeness of assessments by BNSF and its advisors with respect to legal, regulatory, accounting and tax matters.

Except as described above, the BNSF Board imposed no other instructions or limitations on Evercore with respect to the investigations made or the procedures followed by Evercore in rendering its opinion. Evercore’s opinion was only one of many factors considered by the BNSF Board in its evaluation of the merger and should not be viewed as determinative of the views of the BNSF Board or BNSF management with respect to the merger or the merger consideration payable in the merger.

Set forth below is a summary of the material financial analyses reviewed by Evercore with the BNSF Board on November 2, 2009 in connection with rendering its opinion. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. The order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 30, 2009 (the last trading day prior to November 2, 2009, the date on which the BNSF Board adopted a resolution to approve the merger), and is not necessarily indicative of current market conditions.

 

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The following summary of financial analyses includes information presented in tabular format. These tables must be read together with the text of each summary in order to understand fully the financial analyses. The tables alone do not constitute a complete description of the financial analyses. Considering the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Evercore’s financial analyses.

BNSF FINANCIAL ANALYSIS

Historical Share Price Analysis. Evercore considered historical data with regard to the closing stock prices of BNSF common stock as of October 30, 2009 and over the ten-year, five-year, one-year, six-month, three-month, one-month and ten-day periods prior to and including October 30, 2009, and the average closing stock price for each such period. During the one-year period prior to and including October 30, 2009, the closing stock price of BNSF common stock ranged from a low of $51.20 to a high of $91.60 per share, with an average closing stock price of $73.07. The foregoing historical share price analysis was presented to the BNSF Board to provide it with background information and perspective with respect to the relative historical share price of BNSF common stock.

 

		Historical Closing Stock Price
		Low			High			Average
1 Day (October 30, 2009)		$	75.32		$	75.32		$	75.32
10 Days			75.32			86.40			80.34
1 Month			75.32			86.50			81.20
3 Months			75.32			86.50			82.13
6 Months			68.09			86.50			79.07
1 Year			51.20			91.60			73.07
5 Years			41.67			114.56			74.63
10 Years			19.25			114.56			51.46

Historical Exchange Ratio Analysis. Evercore compared the historical per share prices of BNSF common stock and Berkshire Class A common stock over the ten-year, five-year, one-year, six-month, three-month, one-month and ten-day periods prior to and including October 30, 2009 in order to determine the low, high and average implied exchange ratio that existed for each such period.

 

		Historical Exchange Ratio
		Low		High		Average
Current (October 30, 2009)		0.00077x		0.00077x		0.00077x
10 Days		0.00076x		0.00086x		0.00080x
1 Month		0.00076x		0.00086x		0.00081x
3 Months		0.00076x		0.00086x		0.00082x
6 Months		0.00076x		0.00088x		0.00082x
1 Year		0.00065x		0.00093x		0.00078x
5 Years		0.00049x		0.00100x		0.00073x
10 Years		0.00032x		0.00100x		0.00057x

Research Analyst Price Targets. Evercore analyzed research analyst estimates of potential future value for shares of BNSF common stock, commonly referred to as “price targets,” based on publicly available equity research published with respect to BNSF. Evercore observed that, as of October 30, 2009, research analyst one-year forward price targets for shares of BNSF common stock ranged from $70 to $103 per share, with an average price target of $91 per share. Evercore then discounted the price targets twelve months at an assumed discount

 

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rate of 11%, derived by taking into consideration, among other things, a cost of equity calculation, resulting in a present value ranging from $63.06 to $92.79 per share.

Peer Group Trading Analysis. In order to assess how the public market values shares of similar publicly traded companies, Evercore reviewed and compared specific financial and operating data relating to BNSF to that of a group of selected peer companies that Evercore deemed to have certain characteristics that are similar to those of BNSF. As part of its peer group trading analysis, Evercore calculated and analyzed the multiple of current stock price to estimated 2009 and 2010 earnings per share (commonly referred to as a “price earnings multiple,” or “P/E”) for BNSF and each member of its peer group. Evercore also calculated and analyzed the multiple of enterprise value to estimated 2009 and 2010 earnings before interest, taxes, depreciation and amortization (“EBITDA”) (commonly referred to as an “EBITDA multiple”) for BNSF and each member of its respective peer group. The enterprise value of each company was obtained by adding its short and long term debt to the sum of the market value of its common equity and the book value of any minority interest, and subtracting its cash and cash equivalents and book value of unconsolidated investments. The companies that Evercore deemed to have certain characteristics similar to those of BNSF were Canadian National Railway Company, Canadian Pacific Railway Limited, CSX Corporation, Norfolk Southern Corporation and Union Pacific Corporation.

The analysis of current stock price to earnings per share indicated that, for the selected peer group, the current stock price as a multiple of estimated 2009 earnings per share ranged from 14.8x to 17.7x with a mean of 16.1x, and the current stock price as a multiple of estimated 2010 earnings per share ranged from 12.9x to 13.7x with a mean of 13.4x. This compared to a current stock price to estimated 2009 earnings per share multiple of 15.4x for BNSF and a current stock price to estimated 2010 earnings per share multiple of 13.6x for BNSF, in each case based on publicly available research estimates. Evercore noted that, with respect to the merger, the implied price as a multiple of BNSF estimated 2009 and 2010 earnings per share, in each case based on publicly available research estimates, was 20.4x and 18.1x, respectively.

Based on the above analysis, Evercore then applied a range of current stock price as a multiple of estimated 2009 earnings per share of 15.0x to 17.0x and a range of current stock price as a multiple of estimated 2010 earnings per share of 13.0x to 14.0x to the mean of BNSF’s consensus publicly available earnings per share research estimates for 2009 and 2010, respectively. This analysis indicated implied per share equity reference ranges for BNSF common stock of $73.52 to $83.32 and $71.97 to $77.50 based on the mean of BNSF consensus publicly available earnings per share research estimates for 2009 and 2010, respectively. Evercore also applied such ranges of multiples to the respective BNSF 2009 and 2010 earnings per share estimates under each of the BNSF management 2010 Recovery Case, the BNSF management 2011 Recovery Case, the BNSF management No Recovery Case and the BNSF management Deeper Recession Case; such analysis indicated implied per share equity reference ranges for BNSF common stock of $71.55 to $81.09 and $49.66 to $70.56 for 2009 and 2010, respectively. Management of BNSF had informed Evercore that the 2011 Recovery Case is the most likely of the forecasts provided to Evercore.

The analysis of financial multiples indicated that, for the selected peer group, enterprise value as a multiple of estimated 2009 EBITDA ranged from 7.0x to 9.5x with a mean of 8.1x, and enterprise value as a multiple of estimated 2010 EBITDA ranged from 6.4x to 8.3x with a mean of 7.2x. This compared to an enterprise value to estimated 2009 EBITDA multiple of 7.4x and an enterprise value to estimated 2010 EBITDA multiple of 6.7x for BNSF, based on publicly available research estimates. Evercore noted that, with respect to the merger, the implied enterprise value as a multiple of BNSF estimated 2009 and 2010 EBITDA, in each case based on publicly available research estimates, was 9.2x and 8.4x, respectively.

Based on the above analysis, Evercore then applied a range of enterprise value as a multiple of estimated 2009 EBITDA of 7.0x to 8.5x and a range of enterprise value as a multiple of estimated 2010 EBITDA of 6.5x to 8.0x to the mean of BNSF’s consensus publicly available EBITDA research estimates for 2009 and 2010, respectively. This analysis indicated implied per share equity reference ranges for BNSF common stock of

 

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$70.14 to $90.91 and $71.73 to $94.46 based on the mean of consensus publicly available EBITDA estimates for 2009 and 2010, respectively. Evercore also applied such ranges of multiples to the respective BNSF 2009 and 2010 EBITDA estimates, under each of the BNSF management 2010 Recovery Case, the BNSF management 2011 Recovery Case, the BNSF management No Recovery Case and the BNSF management Deeper Recession Case; such analysis indicated implied per share equity reference ranges for BNSF common stock of $69.53 to $90.17 and $56.04 to $90.61 for 2009 and 2010, respectively. Management of BNSF had informed Evercore that the 2011 Recovery Case is the most likely of the forecasts provided to Evercore.

Evercore selected the peer companies identified above because their respective businesses and operating profiles are reasonably similar to that of BNSF. However, because of the inherent differences between the businesses, operations and prospects of BNSF, on the one hand, and the businesses, operations and prospects of the selected peer companies on the other, no company is exactly the same as BNSF.

Discounted Cash Flow Analysis. Evercore performed a discounted cash flow analysis of BNSF in order to derive implied per share equity reference ranges for BNSF based on the implied present value of projected future cash flows of BNSF. In this analysis, Evercore calculated implied per share equity reference ranges for BNSF under each of the BNSF management 2010 Recovery Case, the BNSF management 2011 Recovery Case, the BNSF management No Recovery Case and the BNSF management Deeper Recession Case based on the sum of the (i) implied present values, using discount rates ranging from 8.0% to 10.0% derived by taking into consideration, among other things, a weighted average cost of capital calculation, of BNSF’s projected unlevered free cash flows for calendar years 2010 through 2014 and (ii) implied present values, using discount rates ranging from 8.0% to 10.0%, of the terminal value of BNSF’s future cash flows beyond calendar year 2014 calculated by applying a range of EBITDA terminal multiples of 6.75x to 8.25x derived from the selected peer companies as described in “Peer Group Trading Analysis” above to BNSF’s calendar year 2014 projected EBITDA. This analysis indicated implied per share equity reference ranges for BNSF common stock of $91.50 to 124.47 under the BNSF management 2010 Recovery Case, $81.53 to $112.12 under the BNSF management 2011 Recovery Case, $54.16 to $76.92 under the BNSF management No Recovery Case, and $46.56 to $67.70 under the BNSF management Deeper Recession Case. Management of BNSF had informed Evercore that the 2011 Recovery Case is the most likely of the forecasts provided to Evercore.

Present Value of Future Stock Price Analysis. Evercore performed a present value of illustrative future stock price analysis of BNSF based on the BNSF management projections provided to Evercore. In this analysis, Evercore calculated future prices per share and equity values of BNSF under each of the BNSF management 2010 Recovery Case, the BNSF management 2011 Recovery Case, the BNSF management No Recovery Case and the BNSF management Deeper Recession Case for calendar years 2010 through 2014 by applying a multiple of 13.5x (representing the mid-point of the range of current stock price as a multiple of estimated 2010 earnings per share for the BNSF group of selected peer companies as described in “Peer Group Trading Analysis” above) to BNSF’s projected earnings per share for each of those years. These illustrative future stock prices were discounted to present value as of December 31, 2009 using discount rates of 10.0% to 12.0%, taking into consideration, among other things, a cost of equity calculation, and were increased to reflect the present value of the future dividend projected to be paid by BNSF. With reference to the median discount rate of 11.0%, this analysis indicated ranges of implied value per share of BNSF common stock of $68.04 to $103.73 under the BNSF management 2010 Recovery Case, $59.54 to $89.41 under the BNSF management 2011 Recovery Case, $50.05 to $58.00 under the BNSF management No Recovery Case, and $40.98 to $51.57 under the BNSF management Deeper Recession Case. Management of BNSF had informed Evercore that the 2011 Recovery Case is the most likely of the forecasts provided to Evercore.

 

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Premiums Paid Analysis. Evercore performed a premiums paid analysis of BNSF in order to derive implied per share equity reference ranges for BNSF based on the premiums paid in selected transactions. In this analysis, using publicly available information, Evercore reviewed the premiums paid in the 20 largest transactions (based on transaction value) involving U.S. corporations that were announced between January 15, 1999 and January 26, 2009, which transactions are listed below:

 

Acquiror		Target
•     Vodafone Group PLC		•     AirTouch Communications, Inc.
•     AT&T Corporation		•     MediaOne Group Inc.
•     Qwest Communications International, Inc.		•     US WEST Inc.
•     Viacom Inc.		•     CBS Corporation
•     Pfizer Inc.		•     Warner-Lambert Co.
•     America Online Inc.		•     Time Warner, Inc.
•     JDS Uniphase Corporation		•     SDL Inc.
•     Chevron Corporation		•     Texaco Inc.
•     Pfizer Inc.		•     Pharmacia Corporation
•     Bank of America Corporation		•     FleetBoston Financial Corporation
•     JPMorgan Chase & Co.		•     Bank One Corporation
•     Cingular Wireless LLC		•     AT&T Wireless Services Inc.
•     Sprint Corporation		•     Nextel Communications Inc.
•     The Procter & Gamble Company		•     The Gillette Company
•     Bank of America Corporation		•     MBNA Corporation
•     AT&T Inc.		•     BellSouth Corporation
•     The Blackstone Group L.P.		•     Equity Office Properties Trust
•     InBev NV		•     Anheuser-Busch Companies, Inc.
•     Roche Holding AG		•     Genentech Inc.
•     Pfizer Inc.		•     Wyeth

Evercore reviewed the premiums paid in the selected transactions referenced above based on the value of the per share consideration received in the relevant transaction relative to the closing stock price of the target company one day, one week and four weeks prior to the announcement date of the transaction.

 

		Implied Premiums for Selected Transactions
		1 Day			1 Week			4 Weeks
Mean		26	%		27	%		33	%
Median		23	%		27	%		30	%
High		69	%		54	%		69	%
Low		0	%		2	%		1	%
Mean Since 2008		23	%		26	%		34	%

Based on the above analysis, Evercore then applied low and high selected premiums of 20% and 30% derived from the selected transactions to the closing price of BNSF common stock on October 30, 2009, the last trading day prior to the date on which the BNSF Board adopted a resolution approving the merger agreement. This analysis indicated an implied per share equity reference range for BNSF of $90.38 to $97.92.

Precedent Transactions Analysis. Evercore performed an analysis of selected transactions to compare multiples paid in other transactions to the multiples implied in the merger. Evercore identified and analyzed a

 

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group of six merger and acquisition transactions that were announced (but not necessarily completed) between 1994 and 1999. Although, in Evercore’s opinion, none of those transactions are by themselves directly comparable to the merger, each could be considered similar to the merger (although not necessarily to each other) in certain limited respects. In assessing the quantitative results of the precedent transactions analysis, Evercore noted and made qualitative judgments concerning the small number of potentially comparable transactions and the differences between the nature and characteristics of the merger and such transactions (specifically, rail network transactions occurring between 1994 and 1999 involving strategic parties and projected to generate substantial synergies). For each of the selected transactions, Evercore calculated enterprise value as a multiple of last twelve months (“LTM”) EBITDA and enterprise value as a multiple of LTM revenue.

The selected transactions are set forth below:

 

Date Announced		Acquiror		Target
12/20/99		BNSF		Canadian National Railway Company
02/10/98		Canadian National Railway Company		Illinois Central Corporation
04/08/97		CSX Corporation/Norfolk Southern Corporation		Consolidated Rail Corporation
08/03/95		Union Pacific Corporation		Southern Pacific Rail Corporation
03/10/95		Union Pacific Corporation		Chicago & North Western Transportation Company
06/30/94		BNSF		Santa Fe Pacific Corporation

Based on these transactions, Evercore selected a range of implied enterprise value to LTM EBITDA multiples between 7.0x and 10.0x LTM EBITDA, yielding an implied price per share of BNSF common stock that ranged from $74.39 to $117.76. Evercore noted that the implied enterprise value to LTM EBITDA multiple of the merger was 8.8x relative to the range of implied multiples of 6.8x to 12.5x determined with reference to LTM EBITDA and also noted that the implied enterprise value to LTM revenue multiple of the merger was 2.98x relative to the range of implied multiples of 1.73x to 4.29x determined with reference to LTM revenue.

BERKSHIRE FINANCIAL ANALYSIS

Historical Share Price Analysis. Evercore considered historical data with regard to the closing stock prices of Berkshire Class A common stock for the three-month, one-year and five-year periods prior to and including October 30, 2009. During these periods, the closing stock prices of Berkshire Class A common stock ranged from a low of $95,250 to a high of $108,100 per share in the three-month period, a low of $72,400 to a high of $118,400 per share in the one-year period, and a low of $72,400 to a high of $149,200 per share in the five-year period, in each case prior to and including October 30, 2009, the last trading day prior to the date on which the BNSF Board adopted a resolution approving the merger agreement. The foregoing historical share price analysis was presented to the BNSF Board to provide it with background information and perspective with respect to the relative historical share prices of Berkshire Class A common stock.

Research Analyst Price Targets. Evercore analyzed research analyst estimates of potential future value for shares of Berkshire Class A common stock, commonly referred to as “price targets,” based on publicly available equity research published with respect to Berkshire. Evercore observed that two research analyst one-year forward price targets for shares of Berkshire Class A common stock ranged from $96,000 to $133,000 per share, with an average price target of $114,500 per share. Evercore then discounted the price targets twelve months at an assumed discount rate of 11.5%, derived by taking into consideration, among other things, a cost of equity calculation, resulting in a present value range from $86,108 to $119,295 per share.

Book Value Analysis. Using publicly available information, Evercore analyzed the multiple of closing stock price per share to last reported book value per share for Berkshire for each of the seven and one-half year, five-

 

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year, three-year, one-year, six-month, three-month and one-month periods prior to and including October 30, 2009. Evercore then compared the results of such analysis to the multiples derived from the same analysis for the S&P 500. Based on reference to the median of the upper and lower quartiles of the multiple of closing stock price per share to last reported book value per share for Berkshire for each of the seven and one-half year, five-year, three-year, one-year, six-month, three-month and one-month periods prior to and including October 30, 2009, Evercore selected a range of market price to book value per share multiples of 1.3x to 1.7x, yielding an implied price per share of Berkshire Class A common stock that ranged from $95,948 to $125,471 per share. Evercore also selected and applied a discount range of 30% to 45% discount to the S&P 500 market price to book value per share multiple as of October 30, 2009, yielding an implied price per share of Berkshire Class A common stock that ranged from $88,740 to $112,941 per share.

Forward Price Analysis. Using publicly available research estimates and other publicly-available information, Evercore analyzed the multiple of closing stock price to the next fiscal year mean earnings per share estimate for Berkshire Hathaway for each of the seven and one-half year, five-year, three-year, one-year, six-month, three-month and one-month periods prior to and including October 30, 2009. Evercore then compared the results of such analysis to the multiples derived from the same analysis for the S&P 500. Based on reference to the median of the upper and lower quartiles of the multiple of closing stock price per share to the next fiscal year mean earnings per share estimate for Berkshire for each of the seven and one-half year, five-year, three-year, one-year, six-month, three-month and one-month periods prior to and including October 30, 2009, Evercore selected and applied a premium range of 10% to 40% to the S&P 500 closing stock price to next fiscal year mean earnings per share estimate multiple as of October 30, 2009, yielding an implied price per share of Berkshire Class A common stock that ranged from $85,134 to $108,352.

GENERAL

In connection with the review of the merger by the BNSF Board, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore’s opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Evercore made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all the analyses. In addition, Evercore may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described above should therefore not be taken to be Evercore’s view of the value of BNSF or Berkshire or their respective common stocks. No company used in the above analyses as a comparison is directly comparable to BNSF or Berkshire, and no transaction used is directly comparable to the transactions contemplated by the merger agreement. Further, in evaluating comparable transactions, Evercore made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of BNSF, Berkshire and Evercore, such as the impact of competition on BNSF and Berkshire and their respective industries generally, industry growth and the absence of any material adverse change in the financial condition of BNSF and Berkshire or in the markets generally.

Evercore prepared these analyses for the purpose of providing an opinion to the BNSF Board as to the fairness, from a financial point of view, of the merger consideration to the holders (other than Berkshire and its affiliates) of the shares of BNSF common stock entitled to receive such merger consideration. These analyses do not purport to be appraisals or to necessarily reflect the prices at which the business or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty and are based upon numerous factors, assumptions with respect to industry

 

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performance, general business and economic conditions and other matters or events beyond the control of BNSF, Berkshire and Evercore, none of BNSF, Berkshire or Evercore assumes responsibility if future results are materially different from those forecast. The merger consideration to be received by the holders of the shares of BNSF common stock pursuant to the merger agreement was determined through arm’s-length negotiations between BNSF and Berkshire and was approved by the BNSF Board. Evercore did not recommend any specific merger consideration to the BNSF Board or that any given merger consideration constituted the only appropriate merger consideration.

Pursuant to its engagement letter, a fee of $11.5 million becomes payable to Evercore promptly upon consummation of the transaction. Furthermore, BNSF has agreed to reimburse Evercore for its reasonable expenses incurred in connection with the engagement and to indemnify Evercore for certain liabilities arising out of its engagement.

The BNSF Board engaged Evercore as its financial advisor because it is an internationally recognized investment banking and advisory firm that has substantial experience in transactions similar to the merger. Evercore, as part of its investment banking business, is continuously engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, competitive biddings and valuations for corporate, estate and other purposes. In the ordinary course of its business, Evercore and its affiliates may, from time to time, trade in the securities or the indebtedness of BNSF, Berkshire and their affiliates or any currencies or commodities (or derivative thereof) for its own account, the accounts of investment funds and other clients under the management of Evercore and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities, indebtedness, currencies or commodities (or derivative thereof) for any such account. Evercore may provide financial or other services to BNSF or Berkshire in the future and in connection with any such services Evercore may receive compensation.

Interests of BNSF Directors and Executive Officers in the Merger

In considering the recommendation of the BNSF Board that you vote to adopt the merger agreement, you should be aware that aside from their interests as BNSF stockholders, BNSF’s directors and executive officers have interests in the merger that are different from, or in addition to, those of other BNSF stockholders generally. The members of the BNSF Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the BNSF stockholders that the merger agreement be adopted.

As described in more detail below, these interests include:

 

•

vesting and settlement of BNSF restricted stock units held by directors;

 

•

funding of Mr. Whitacre’s benefits under BNSF’s Directors’ Charitable Award Program;

 

•

conversion of BNSF stock options held by executive officers and one non-employee director and BNSF restricted stock units held by executive officers into Berkshire equity awards;

 

•

payment of directors’ benefits under BNSF’s director deferred compensation and retirement plans;

 

•

settlement of executive officers’ units in BNSF’s Senior Management Stock Deferral Plan;

 

•

vesting of executive officers’ unvested benefits in BNSF’s supplemental retirement plans;

 

•

executive officers’ receipt of certain benefits under their change in control agreements if certain terminations of employment occur in connection with the merger;

 

•

funding of BNSF’s Benefits Protection Trust with respect to certain benefit plans and agreements; and

 

•

Berkshire’s agreement to indemnify directors and officers against certain claims and liabilities and to continue such indemnification for a period of six years from the effective time of the merger.

 

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Directors

Equity Awards

Pursuant to their current terms, any unvested BNSF restricted stock units held by non-employee directors will vest upon stockholder adoption of the merger agreement. As described under “The Merger Agreement—Treatment of BNSF Equity Compensation Awards,” the BNSF restricted stock units held by directors will then be converted into restricted stock units with respect to Berkshire Class B common stock. Pursuant to their current terms, they will be settled in shares of Berkshire Class B common stock shortly after the directors cease to serve on the BNSF Board upon completion of the merger. The merger agreement provides that BNSF may amend the BNSF restricted stock units held by non-employee directors so that the BNSF common stock deliverable thereunder will be delivered to the directors up to 30 days prior to completion of the merger, so long as such amendments will not result in adverse tax consequences to BNSF or the directors or increase the number of shares deliverable thereunder. BNSF and Berkshire’s Chairman will consult on whether, in lieu of delivery of such BNSF common stock, BNSF’s obligations will be settled in cash of equivalent value.

Assuming stockholder adoption of the merger agreement occurs on [—], [—] unvested BNSF restricted stock units held by BNSF’s ten non-employee directors as a group will vest upon such stockholder adoption, and [—] BNSF restricted stock units held by BNSF’s ten non-employee directors as a group, or the Berkshire restricted stock units resulting from the conversion of such BNSF restricted stock units, or cash of equivalent value to such BNSF restricted stock units, as applicable, will be settled or paid to directors in connection with the merger.

As described under “The Merger Agreement—Treatment of BNSF Equity Compensation Awards,” BNSF stock options held by one non-employee director (all of which are already fully vested) will be converted into stock options with respect to Berkshire Class B common stock.

Directors’ Charitable Award Program

Under the Directors’ Charitable Award Program established by one of BNSF’s predecessor companies, a $1,000,000 donation to an eligible educational institution designated by Mr. Whitacre will be payable upon his death. Except as to the directors of the predecessor company to which the program applied, the program was discontinued in 1995, and therefore Mr. Whitacre is the only current director who is eligible to participate. Upon stockholder adoption of the merger agreement, BNSF will immediately designate Mr. Whitacre’s recommended educational institution as a beneficiary under the program and place all necessary funds to make the donation into a trust administered by an independent trustee.

Directors’ Deferred Compensation and Retirement Plans

Directors’ benefits in certain director deferred compensation and retirement plans, all of which are fully vested, will become payable in connection with directors’ cessation of services on the BNSF Board upon completion of the merger. The merger will not, however, lead to any increase in the value of such benefits.

Executive Officers

Equity Awards

As described under “The Merger Agreement—Treatment of BNSF Equity Compensation Awards,” BNSF stock options and BNSF restricted stock units held by employees of BNSF, including executive officers, will be converted into stock options and restricted stock units with respect to Berkshire Class B common stock.

The applicable BNSF equity compensation plan provides that if the BNSF Board determines that the resulting Berkshire stock options and Berkshire restricted stock units will not be comparable to the BNSF stock options and BNSF restricted stock units, respectively, all the BNSF stock options and BNSF restricted stock units

 

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held by employees will vest upon stockholder adoption of the merger agreement, and the performance goals for any performance-based BNSF restricted stock units will be deemed to be satisfied at target. It is expected that the BNSF Board will determine that the Berkshire stock options and the Berkshire restricted stock units will have terms comparable to the BNSF stock options and the BNSF restricted stock units, so that this provision will not apply.

Certain executive officers have deferred some of their compensation in the form of share units with respect to BNSF common stock in BNSF’s Senior Management Stock Deferral Plan. These units, which are fully vested, will be converted into restricted stock units with respect to Berkshire Class B common stock in the same manner as all other BNSF restricted stock units, as described under “The Merger Agreement—Treatment of BNSF Equity Compensation Awards.” Pursuant to the terms of the Senior Management Stock Deferral Plan, the units will be settled in shares of Berkshire Class B common stock shortly after completion of the merger (or at an earlier time previously elected by the executive officer). Pursuant to the merger agreement, BNSF may amend the Senior Management Stock Deferral Plan so that the BNSF common stock deliverable with respect to units thereunder will be delivered to the executive officers up to 30 days prior to completion of the merger, so long as such amendments will not result in adverse tax consequences to BNSF or the executive officers or increase the number of shares deliverable thereunder. BNSF and Berkshire’s Chairman will consult on whether, in lieu of delivery of such BNSF common stock, BNSF’s obligations will be settled in cash of equivalent value.

The following table sets forth for each of the executive officers the number of units in the Senior Management Stock Deferral Plan that will be settled in the form of BNSF common stock, Berkshire Class B common stock or cash in connection with the merger (assuming that such units are not settled on an earlier date pursuant to existing deferral elections).

 

Executive Officer		Number of share units in the Senior Management Stock Deferral Plan

Pursuant to the terms of the applicable BNSF equity compensation plan and change in control agreements entered into with employees at the level of vice president and above, including the executive officers (described below), if an employee’s employment is terminated by BNSF or Berkshire for reasons other than “cause,” or if the employee’s employment is terminated by the employee for “good reason,” in each case in connection with the merger, all stock options and restricted stock units held by the employee will vest, with performance-based awards vesting at target, and the exercise period for vested stock options will be extended to the lesser of five years following termination and the expiration date of the stock option. However, pursuant to a letter executed by Mr. Rose on November 17, 2009, Mr. Rose waived his rights to accelerated vesting under the equity compensation plan and his change in control agreement in connection with the merger.

Under the applicable BNSF equity compensation plan, “good reason” means (i) a relocation of the employee’s work location by more than 50 miles, (ii) a reduction in the employee’s base salary by more than 15% or (iii) a reduction in the aggregate value of the employee’s annual salary, bonus opportunity and long-term incentive compensation by more than 15% (other than broad-based reductions in compensation).

Under the change in control agreements, “good reason” means (i) the assignment to the employee of duties with a level of responsibility materially inconsistent with the position that the employee held immediately prior to stockholder adoption of the merger agreement, or a significant adverse alteration in the status of the employee’s responsibilities from those in effect immediately prior to stockholder approval of the merger, (ii) a material reduction in the employee’s base salary, excluding across-the-board salary reductions similarly affecting all management employees, (iii) a relocation of the employee’s work location by more than 50 miles, (iv) the failure of BNSF to pay the employee any material portion of his or her compensation within seven days after the date such compensation is due, (v) the failure of BNSF to continue any material compensation or benefit plan, unless an equitable arrangement has been made with respect to such plan, or the failure by BNSF to continue the

 

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employee’s participation in any such plan on a basis not materially less favorable than the basis of his or her participation at the time of stockholder adoption of the merger agreement, (vi) the failure of BNSF to obtain an agreement from any successor company to assume and agree to comply with the change in control agreement or (vii) any purported termination of the employee’s employment by BNSF that is not effected in material compliance with the notice provisions of the change in control agreement. Good reason will exist under the equity compensation plan and the change in control agreements only if BNSF has not corrected the applicable circumstances after being given notice of them by the employee.

Assuming stockholder adoption of the merger agreement occurs on [—] and the executive officer experiences a simultaneous qualifying termination of employment by BNSF, the following table sets forth for each of the executive officers (other than Mr. Rose, who has waived his right to accelerated vesting, as described above) the number of unvested BNSF stock options and BNSF restricted stock units that would vest under his change in control agreement. Depending on when stockholder adoption of the merger agreement occurs, certain BNSF stock options and BNSF restricted stock units shown as unvested in the table below may become vested in accordance with their terms without regard to the merger.

 

Executive Officer		Number of Unvested BNSF Stock Options		Number of Unvested BNSF Restricted Stock Units

Retirement Plans

Upon stockholder adoption of the merger agreement, all unvested benefits of executive officers in BNSF’s Supplemental Retirement Plan and Supplemental Investment and Retirement Plan will vest. The following table shows the unvested benefits of the executive officers in these two plans as of [—] that will vest upon stockholder adoption of the merger agreement, assuming such stockholder adoption occurs on [—]. Any additional unvested amounts contributed to the plans prior to such stockholder adoption will also vest upon such stockholder adoption. Depending on when stockholder adoption occurs, certain of the amounts shown as unvested in the table below may become vested in accordance with their terms without regard to the merger.

 

Executive Officer		Supplemental Retirement Plan Benefits		Supplemental Investment and Retirement Plan Benefits

Change in Control Agreements

BNSF has entered into individual change in control agreements with employees at the level of vice president and above, including all executive officers, that provide for certain payments and benefits upon a termination of employment by BNSF without cause or by the employee for good reason (defined as described above) any time within the 24 months following stockholder adoption of the merger agreement (or on or prior to the 12-month anniversary of the completion of the merger, if later) or during the 60 days prior to stockholder adoption of the merger agreement. Mr. Rose has waived his right to receive the payments and benefits provided for in his change in control agreement in connection with the merger.

The change in control agreements for the executive officers provide for the following payments and benefits upon a qualifying termination:

 

•

a pro-rata bonus based on the employee’s target annual incentive opportunity for the year of termination;

 

•

a lump-sum cash payment equal to two times (or one-and-a-half times for Linda Longo-Kazanova and Peter J. Rickershauser) the sum of (i) the employee’s then-current annual base salary (or, if higher, his

 

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or her highest consecutive 12 months’ salary over the prior 24-month period, or his or her annual salary in effect immediately prior to stockholder adoption of the merger agreement) and (ii) the employee’s target annual incentive opportunity for the year of termination;

 

•

a lump-sum cash payment equal to an additional 0.5 times the sum described in the previous bullet, in consideration for the employee’s compliance with the post-employment covenants described below;

 

•

continuation of company-paid medical, dental and other insurance benefits for up to 24 months;

 

•

the equity award vesting and extension of the exercise period for vested stock options described above;

 

•

eligibility for retiree medical benefits and retiree life insurance coverage under the applicable BNSF plans if the employee would have been eligible for such benefits pursuant to BNSF’s severance plan if the employee had not been covered by the change in control agreement;

 

•

reimbursement for outplacement services and legal fees and expenses relating to any claims under the agreement that result from termination of employment; and

 

•

payment of a gross-up to make the employee whole for any excise tax imposed as a result of Section 280G of the Code (except that if the total payments do not exceed 110% (105% in the first three years of employment) of the maximum amount that would result in no excise tax, and therefore no gross-up, being payable, the payments will be reduced to such maximum amount).

Pursuant to the change in control agreements, an employee will not be entitled to the benefits listed above unless the employee executes a release of claims in favor of BNSF.

If BNSF terminates an employee’s employment without cause, or an employee terminates his or her employment for good reason, under the change in control agreement, then, for the 12-month period following the termination, the employee will be subject to non-competition and non-solicitation covenants that prevent the employee from competing with BNSF and soliciting or hiring any employee of BNSF without BNSF’s consent. If the employee breaches these covenants, all severance payments will cease and BNSF may, in its discretion, require the employee to repay any severance payments already received.

Based on compensation and benefit levels as of [—], and assuming stockholder adoption of the merger agreement occurs on [—] and that the executive officer experiences a simultaneous qualifying termination of employment, the executive officers (other than Mr. Rose, who has waived his change in control payments and benefits, as described above) will be entitled to receive the following cash severance payments and other benefits under their change in control agreements (excluding the value of unvested equity awards, which are described above).

 

Executive Officer

Cash Severance (including pro rata bonus)

Cash Non-compete Payment

Continuation of Health and Welfare Benefits(1)

Extension of Eligibility for Retiree Welfare Benefits

Outplacement Services

280G Tax Gross-Up(2)

 

(1)	The amounts shown in this column represent an estimate of the present value of the cost to BNSF of providing the benefits, considering the applicable COBRA premiums for medical and dental benefits and premiums for life insurance and long-term disability benefits.

 

(2)

BNSF determined the amount of the excise tax payment by multiplying by 20% the “excess parachute payments” that would arise in connection with the merger. The excess parachute payments were determined in accordance with the provisions of Section 280G of the Code. BNSF utilized the following key assumptions to determine the executive officers’ tax gross-up payments:

 

•

a statutory federal income tax rate of 35% and a Medicare tax rate of 1.45%;

 

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•

each executive officer’s Section 280G “base amount” was determined based on average W-2 compensation for the period from 2005 through 2009 (or the period of the executive’s employment with BNSF, if shorter); and

 

•

the interest rate assumption was 120% of the applicable Federal rate as of [—].

Mr. Rose’s Retirement Benefit Agreement

Mr. Rose’s retirement benefit agreement provides for certain additional service credit for purposes of computing his supplemental retirement benefits in the event of a termination of his employment for any reason within certain time periods following a change in control. Mr. Rose has waived his right to receive this additional service credit in connection with the merger.

Benefits Protection Trust

Upon stockholder adoption of the merger agreement, unless the BNSF Board decides that a change in control has not occurred for purposes of BNSF’s Benefits Protection Trust, BNSF is required to deposit in the trust an amount equal to the value of participants’ accrued benefits under certain BNSF plans, including the Senior Management Stock Deferral Plan, the Supplemental Retirement Plan, the Supplemental Investment and Retirement Plan, Mr. Rose’s retirement benefit agreement, the change in control agreements, BNSF’s Incentive Compensation Plan, BNSF’s deferred compensation plans (including those for directors) and BNSF’s Directors’ Retirement Plan. For the two years following stockholder adoption of the merger agreement, BNSF must ensure that the trust is funded sufficiently to pay benefits under such plans and agreements.

Indemnification

Under the merger agreement, Berkshire has agreed to indemnify, defend and hold harmless the current and former directors and officers of BNSF and any of its subsidiaries against certain losses, claims and liabilities arising from the fact that such person is or was a director or officer of BNSF or any of its subsidiaries and in respect of acts or omissions which occurred at or prior to the effective time of the merger, as well as against losses, claims and liabilities based on, or arising out of or pertaining to, in whole or in part, the merger agreement or the transactions contemplated by it.

Notwithstanding the foregoing, such indemnification will not apply to any claims against an indemnified party if (i) a judgment or other final adjudication established that the indemnified party’s acts or omissions were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so deliberated or (ii) which arise out of, are based upon or are attributable to the gaining of any financial profit or other advantage to which such indemnified person is not legally entitled.

In addition, Berkshire has agreed to continue in full force and effect, for a period of not less than six years from the effective time of the merger, all rights to indemnification, as of the date of execution of the merger agreement, in favor of the directors, officers and fiduciaries of BNSF and its subsidiaries, with respect to their activities prior to the effective time of the merger, as provided in their respective certificates of incorporation, bylaws or comparable documents.

Regulatory Approvals Required for the Merger

The following is a summary of the material regulatory requirements for completion of the merger. There can be no guarantee if and when any of the consents or approvals required for the merger will be obtained or as to the conditions that such consents and approvals may contain. Berkshire and BNSF intend to make all required filings as promptly as practicable. The management of each of Berkshire and BNSF currently believe that the necessary regulatory approvals can be obtained by the end of the first quarter of 2010; however, there can be no assurances that such approvals will be obtained in accordance with this timing or at all. For further information, please read the section titled “Risk Factors” beginning on page 26.

 

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The merger is subject to the requirements of the HSR Act and the rules promulgated by the FTC, which prevent transactions such as the merger from being completed until (i) certain information and materials are furnished to DOJ and the FTC and (ii) the applicable waiting period is terminated or expires.

Notwithstanding the foregoing, at any time before or after the completion of the merger, the DOJ, the FTC or any state may still challenge the merger on antitrust grounds. Accordingly, at any time before or after the completion of the merger, any of the DOJ, the FTC or any state may take action under the antitrust laws as it deems necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the merger, permitting completion subject to regulatory concessions or conditions or seeking divestiture of the businesses acquired as a result of the merger. Private parties and non-U.S. governmental authorities may also institute legal actions under the antitrust laws under some circumstances. There can be no assurance that a challenge to the merger under the antitrust laws will not be made, or, if such a challenge is made, that it will not succeed.

Under the merger agreement, consummation of the merger is also conditional upon the receipt of certain approvals from the FCC with respect to the transfer of control of certain types of licenses and other authorizations issued by the FCC. There can be no assurance that the requisite FCC approvals will be obtained on a timely basis or at all.

Berkshire and BNSF also intend to make all required filings under the Securities Act and the Exchange Act relating to the merger and obtain all other approvals and consents which may be necessary to give effect to the merger.

Appraisal Rights

Appraisal rights generally are statutory rights that, if applicable under law, enable stockholders to decline to accept the consideration payable in an extraordinary transaction, such as a merger, and instead to demand that the company pay in cash the fair value for their shares as determined by a court in a judicial proceeding.

Under Delaware law, appraisal rights are only available if, among other things, stockholders are required to accept cash for their shares (other than cash in lieu of fractional shares). Therefore, with respect to any shares of BNSF common stock for which you did not elect to receive cash merger consideration, but would be required under the merger agreement to receive cash merger consideration (other than cash in lieu of fractional shares of Berkshire Class B common stock), you may have the right, if you do not vote in favor of the merger agreement, in lieu of receiving the cash merger consideration for those shares, to obtain payment in cash for the “fair value” of those shares as determined by the Court. Pursuant to Section 262 of the General Corporation Law of the State of Delaware (“Section 262”), BNSF stockholders who do not vote in favor of the merger and who comply with the applicable requirements of Section 262 will have the right to seek appraisal of the fair value of such shares as determined by the Court if the merger is completed. The appraised value will not include any value arising from the accomplishment or expectation of the merger, but will include interest on such appraised value from the effective date of the merger until the date such appraised value is paid, calculated at 5% over the Federal Reserve discount rate during such period, unless the Court determines otherwise for good cause shown. It is possible that the fair value as determined by the Court may be more or less than, or the same as, the merger consideration. BNSF reserves the right to take the position that appraisal may only be sought with respect to shares described in the first sentence of this paragraph, and may not be exercised with respect to any shares as to which cash was elected or stock was received.

BNSF stockholders electing to exercise appraisal rights must comply with the strict procedures set forth in Section 262 in order to demand and perfect their rights. SINCE THE FINAL ALLOCATION OF CASH AND STOCK MERGER CONSIDERATION WILL NOT BE DETERMINED UNTIL THE CLOSING OF THE MERGER, ANY STOCKHOLDER WISHING TO PRESERVE THEIR RIGHTS TO APPRAISAL MUST MAKE A DEMAND FOR APPRAISAL NOW AS DESCRIBED BELOW.

 

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The following is intended as a brief summary of the material provisions of Section 262 required to be followed by dissenting BNSF stockholders wishing to demand and perfect their appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is subject to and qualified in its entirety by reference to Section 262, the full text of which appears in Annex B to this proxy statement/prospectus.

Under Section 262, BNSF is required to notify stockholders not less than 20 days before the special meeting to vote on the merger that appraisal rights will be available. A copy of Section 262 must be included with that notice.

THIS PROXY STATEMENT/PROSPECTUS CONSTITUTES BNSF’S NOTICE TO ITS STOCKHOLDERS OF THE AVAILABILITY OF APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER UNDER SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE.

If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 set forth in Annex B to this proxy statement/prospectus and consult your legal advisor. If you fail to timely and properly comply with the requirements of Section 262, your appraisal rights may be lost.

If you elect to demand appraisal of your shares of BNSF common stock, you must satisfy each of the following conditions:

 

•

You must deliver to BNSF a written demand for appraisal of your shares before the vote is taken on the merger agreement at the special meeting. This written demand for appraisal must be in addition to and separate from any proxy or vote abstaining from or voting against the merger. Voting against or failing to vote for the merger does not by itself constitute a demand for appraisal under Section 262.

 

•

You must not vote in favor of the merger. An executed proxy that is submitted but does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the merger agreement. A vote in favor of the merger, by proxy or in person, will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously filed written demands for appraisal.

 

•

You must continuously hold your shares of BNSF common stock from the date you make your demand for appraisal rights through the effective time of the merger.

If you fail to comply with any of these conditions and the merger is completed, you will lose your appraisal rights with respect to your shares of BNSF common stock. Only a holder of record of shares of BNSF common stock, or a person duly authorized and explicitly purporting to act on that stockholder’s behalf, is entitled to assert appraisal rights for the shares of common stock registered in that stockholder’s name. A demand for appraisal must be executed by or on behalf of the stockholder of record, fully and correctly, as such stockholder’s name appears on their stock certificates, and must state that such person intends thereby to demand appraisal of their shares of BNSF common stock in connection with the proposed merger. Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to BNSF. The beneficial owner must, in such cases, have the registered stockholder submit the required demand in respect of those shares.

If the shares of BNSF common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the shares of BNSF common stock are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand must be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is acting as agent for such owner or owners. Stockholders who hold their shares of BNSF common stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

 

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All demands for appraisal should be made in writing and addressed to:

Burlington Northern Santa Fe Corporation

2650 Lou Menk Drive

Fort Worth, Texas 76131

Attention: Corporate Secretary

and must be executed by, or on behalf of, the record holder of the shares of BNSF common stock. The written demand must identify the BNSF stockholder and state that the stockholder intends to demand appraisal of the shares of BNSF common stock held by the stockholder. If your shares of BNSF common stock are held through a bank, broker or other nominee and you wish to demand appraisal rights, you must act promptly to instruct the applicable bank, broker or other nominee to follow the steps summarized in this section.

Within 10 days after the effective time of the merger, the entity surviving the merger must give written notice that the merger has been completed to each BNSF stockholder who has properly sent a written demand for appraisal and who did not vote in favor of the merger.

Within 120 days after the effective time of the merger, either the surviving entity or any stockholder who has complied with the requirements of Section 262 may commence an appraisal proceeding by filing a petition with the Court demanding a determination of the value of the shares held by all stockholders entitled to appraisal rights. The entity surviving the merger has no obligation to file such a petition. A person who is the beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal with the Court. If a petition is not filed within such 120-day period, all appraisal rights relating to shares of BNSF common stock will terminate.

At any time within 60 days after the effective time of the merger, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw the demand for appraisal made by the stockholder by delivering to the surviving entity a written withdrawal of the demand for appraisal. BNSF stockholders who withdraw their demand or otherwise fail to perfect or lose their appraisal rights will be entitled to receive in respect of their shares the merger consideration that was payable in respect of shares for which no election to receive cash or stock was made, without any interest thereon, as specified by the merger agreement. Any attempt to withdraw an appraisal demand more than 60 days after the effective time of the merger will require the written approval of the surviving entity. No appraisal proceeding in the Court will be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw a demand for appraisal and accept the merger consideration offered pursuant to the merger agreement within 60 days after the effective date of the merger. If the surviving entity does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s right to appraisal in accordance with the proviso in the immediately preceding sentence, if the Court does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration being offered pursuant to the merger agreement. Within 120 days after the effective time of the merger, any stockholder who has complied with Section 262 will be entitled, upon written request, to receive from the surviving entity a statement setting forth the aggregate number of shares of BNSF common stock with respect to which demands for appraisal have been received. The statement must be mailed within ten days after a written request therefor has been received by the surviving entity or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later.

If a dissenting stockholder duly files a petition for appraisal with the Court and the petition is served on the surviving entity, then the surviving entity must file with the Court within 20 days after being served such petition a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. After giving notice of the

 

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time and place fixed for hearing of such petition, the Court is empowered to conduct a hearing upon the petition to determine those stockholders who have complied with the requirements of Section 262 and who are entitled to appraisal rights.

The Court may require stockholders who have demanded payment of the fair value of their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings. If any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. After determination of the stockholders entitled to appraisal rights, an appraisal proceeding shall be conducted in accordance with the rules of the Court, including any rules specifically governing appraisal proceedings, and the Court will determine the fair value of the shares of BNSF common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. Once the fair value is determined by the Court, the surviving entity will pay all dissenting stockholders the appraised value of their shares, together with interest accrued thereon during the pendency of the proceeding, upon surrender by such holders of the certificates representing such shares.

In determining fair value, the Court is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the target corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined could be more than, the same as or less than the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares and that an investment banking opinion as to fairness from a financial point of view is not necessarily an opinion as to fair value under Section 262. Although BNSF believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Court, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the merger consideration. Neither Berkshire nor BNSF anticipate offering more than the applicable merger consideration to any stockholder of BNSF exercising appraisal rights, and reserve the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of BNSF common stock is less than the applicable merger consideration. The Delaware courts have stated that the methods which are generally considered acceptable in the financial community and otherwise admissible in court may be considered in the appraisal proceedings. In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder’s exclusive remedy.

If a petition for appraisal is not timely filed, then the right to an appraisal will cease. Costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court and charged to the parties as the Court deems equitable under the circumstances. Upon application of any

 

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dissenting stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all shares entitled to appraisal.

If any stockholder who demands appraisal of shares of BNSF common stock under Section 262 fails to perfect, successfully withdraws or loses such holder’s right to appraisal, the stockholder’s shares of BNSF common stock will be deemed to have been converted at the effective date of the merger into the right to receive the merger consideration pursuant to the merger agreement. A stockholder will fail to perfect, or effectively lose, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the effective date of the merger. In addition, as indicated above, a stockholder may withdraw a demand for appraisal in accordance with Section 262 and accept the merger consideration offered pursuant to the merger agreement.

Any stockholder who has demanded appraisal rights will not, after the effective time of the merger, be entitled to vote the stockholder’s shares for any purpose or to receive payments of dividends or any other distribution with respect to such shares (other than with respect to payment as of a record date prior to the effective time of the merger).

In view of the complexity of Section 262, BNSF stockholders who may wish to dissent from the merger and pursue appraisal rights should consult their legal advisors. Failure to take any required step in connection with exercising appraisal rights may result in the termination or waiver of such rights.

NYSE Listing of Berkshire Class A and Class B Common Stock

Shares of Berkshire Class A and Class B common stock are quoted on the NYSE under the stock symbols “BRK.A” and “BRK.B,” respectively. It is a condition to completion of the merger that the shares of Class A and Class B common stock to be issued by Berkshire to BNSF stockholders in connection with the merger be approved for listing on the NYSE, subject to official notice of issuance. Berkshire has agreed to use its best efforts to cause such shares to be listed on the NYSE and expects to obtain the NYSE’s approval to list such shares prior to completion of the merger, subject to official notice of issuance.

Delisting and Deregistration of BNSF Common Stock

Shares of BNSF common stock currently trade on the NYSE under the stock symbol “BNI.” Upon completion of the merger, all shares of BNSF common stock will cease to be listed for trading on the NYSE and will be deregistered under the Exchange Act.

Litigation

Purported class action lawsuits have been filed by alleged BNSF stockholders challenging the proposed transaction and naming as defendants BNSF and the BNSF Board and, in certain instances, Berkshire and Merger Sub. To date, such stockholder actions have been filed in Tarrant County, Texas (Kinsey v. Burlington Northern Santa Fe Corporation, et al. (Case No. 348 241465 09) filed on November 3, 2009, Graulich v. Boeckmann, et al. (Case No. 141 241528 09) filed on November 6, 2009, Lewis v. Burlington Northern Santa Fe Corporation, et al. (Case No. 017-241596-09) filed on November 9, 2009, and Satinoff v. Burlington Northern Santa Fe Corporation, et al. (Case No. 048 241702 09) filed on November 13, 2009), Dallas County, Texas (Employees Retirement System of the City of New Orleans v. Burlington Northern Santa Fe Corporation, et al. (Case No. DC-09-14950) filed on November 4, 2009, Stubenrauch v. Rose, et al. (Case No. DC-09-15118) filed on November 6, 2009, and Panu v. Burlington Northern Santa Fe Corporation, et al. (Case No. DC-09-15139) filed on November 9, 2009) and the Delaware Chancery Court (Louisiana Municipal Police Employees Retirement System v. Burlington Northern Santa Fe Corp., et al. (Case No. 5043-VCL) filed on November 5, 2009, High Tech Investment Club v. Burlington Northern Santa Fe Corporation, et al. (Case No. 5044-VCL)

 

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filed on November 5, 2009, Ferris v. Burlington Northern Santa Fe Corporation, et al. (Case No. 5045-VCL) filed on November 5, 2009, August, et al. v. Burlington Northern Santa Fe Corporation, et al. (Case No. 5062-VCL) filed on November 10, 2009, and Kahn-Kirby v. Burlington Northern Santa Fe Corporation, et al. (Case No. 5082-VCL) filed on November 17, 2009). The Kinsey, Graulich, Lewis and Satinoff actions in Tarrant County, Texas have been consolidated before Judge Womack as In re Burlington Northern Santa Fe Corporation Shareholder Class Action Litigation, No. 348-241465-09. The Delaware actions have been consolidated before Vice Chancellor Laster as In re Burlington Northern Santa Fe Shareholders Litigation, Case No. 5043-VCL.

The stockholder actions generally allege, among other things, that (i) the consideration being offered is unfair and inadequate, (ii) BNSF’s directors did not adequately seek to maximize stockholder value through open bidding or market check mechanisms, (iii) the “no shop” clause and termination fee are onerous deal protection devices designed to discourage a superior offer, (iv) BNSF’s earnings forecasts were manipulated to drive its stock price down and thus make the proposed transaction appear more favorable to stockholders than it truly is, (v) BNSF’s directors have (for these reasons and others) thus breached their fiduciary duties, and (vi) Berkshire aided and abetted these breaches. Certain of the stockholder actions also allege that BNSF’s disclosures have been, or will in the future be, inadequate. The stockholder actions seek various remedies, including enjoining the transaction from being consummated in accordance with the agreed-upon terms. The defendants intend to defend against these and any additional future claims.

 

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THE MERGER AGREEMENT

This section of the proxy statement/prospectus describes the material provisions of the merger agreement but does not purport to describe all of the terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement/prospectus and incorporated into this proxy statement/prospectus by reference. Berkshire and BNSF urge you to read the full text of the merger agreement because it is the legal document that governs the merger. The merger agreement is not intended to provide you with any other factual information about Berkshire or BNSF. In particular, the assertions embodied in the representations and warranties contained in the merger agreement (and summarized below) are qualified by disclosures made by the parties to each other in connection with the signing of the merger agreement, that modify, qualify and create exceptions to the representations and warranties set forth in the merger agreement. Moreover, certain representations and warranties in the merger agreement were used for the purpose of allocating risk between Berkshire and BNSF rather than establishing matters as facts and may be subject to a contractual standard of materiality or material adverse effect different from that generally applicable to public disclosures to stockholders. Accordingly, you should not rely on the representations and warranties in the merger agreement (or the summaries contained herein) as characterizations of the actual state of facts about Berkshire or BNSF. The representations and warranties in the merger agreement and the description of them in this document should not be read alone but instead should be read in conjunction with the other information contained in the reports, statements and filings that each of Berkshire and BNSF file with the SEC. Please see the section titled “Where To Find More Information” beginning on page 116 of this proxy statement/prospectus.

The Merger

The merger agreement provides for the merger of BNSF with and into Merger Sub upon the terms, and subject to the conditions, of the merger agreement. As the surviving entity, Merger Sub will survive the merger and continue to exist as an indirect wholly owned subsidiary of Berkshire. Upon consummation of the merger, Merger Sub will change its name to “Burlington Northern Santa Fe, LLC.” The merger will be effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware (or at a later time, if agreed upon by the parties and specified in the certificate of merger filed with the Secretary of State of the State of Delaware). Each of BNSF and Berkshire expects to complete the merger as promptly as practicable after BNSF stockholders adopt the merger agreement, subject to the satisfaction or waiver of the other conditions to completion of the merger.

Merger Consideration

In the merger, each share of BNSF common stock (other than certain restricted shares, shares owned by Berkshire, BNSF or any of their respective subsidiaries, or shares in respect of which appraisal rights have been properly exercised and not withdrawn) will be converted into the right to receive, at the election of the stockholder (subject to the proration and reallocation procedures described below), either (i) $100.00 in cash, without interest, or (ii) a portion of a share of Berkshire Class A common stock equal to the exchange ratio, which is calculated by dividing $100.00 by the average of the daily volume-weighted average trading prices per share of Berkshire Class A common stock over the ten trading day period ending on the second full trading day prior to completion of the merger (the “Class A average trading value”); provided, however, that if the Class A average trading value is above or below the “collar” (as described below), then the exchange ratio will be fixed at 0.000802233 or 0.001253489, as the case may be.

If the application of the exchange ratio to all shares in respect of which a stockholder has elected to receive stock would cause such stockholder to receive a fraction of a share of Berkshire Class A common stock, such stockholder will instead receive a number of shares of Berkshire Class B common stock equal in value to such fractional share of Berkshire Class A common stock. If after applying the foregoing calculation, the stockholder would receive a fraction of a share of Berkshire Class B common stock, the stockholder will instead receive cash with a value equal to the value of such fractional share of Berkshire Class B common stock.

 

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The stock component of the merger consideration is subject to a collar, whereby if the Class A average trading value is equal to or between $79,777.34 and $124,652.09 (the “collar”), then the exchange ratio will “float” so as to ensure that the aggregate value of Berkshire common stock received in exchange for each share of BNSF common stock, as calculated based on the Class A average trading value and the average of the daily volume-weighted average trading prices per share of Berkshire Class B common stock over the ten trading day period ending on the second full trading day prior to completion of the merger (the “Class B average trading value”), is fixed at $100.00 per share of BNSF common stock. If the Class A average trading value is less than $79,777.34 or more than $124,652.09, then the exchange ratio will be fixed at 0.001253489 or 0.000802233, as the case may be. Accordingly, if the Class A average trading value is less than the low end of the collar, then the value of the stock portion of the merger consideration to be paid per share of BNSF common stock, as calculated based on the Class A average trading value and the Class B average trading value, will be less than the cash portion of such consideration. Conversely, if the Class A average trading value is greater than the high end of the collar, then the value of the stock portion of the merger consideration to be paid per share of BNSF common stock, as calculated based on the Class A average trading value and the Class B average trading value, will be greater than the cash portion of such consideration.

By way of example, if the Class A average trading value is $75,000, then the exchange ratio will be fixed at 0.001253489 and stockholders will receive, for each share of BNSF common stock that is exchanged for Berkshire common stock, Berkshire common stock valued, based on the Class A average trading value and the Class B average trading value, at approximately $94.01 (0.001253489 x $75,000), which is less than the $100.00 per share received for shares that are exchanged for cash. Alternatively, if the Class A average trading value is $130,000, then the exchange ratio will be fixed at 0.000802233 and stockholders will receive, for each share of BNSF common stock that is exchanged for Berkshire common stock, Berkshire common stock valued, based on the Class A average trading value and the Class B average trading value, at approximately $104.29 (0.000802233 x $130,000), which is more than the $100.00 per share received for shares that are exchanged for cash.

Approximately 60% of the total merger consideration payable by Berkshire to BNSF stockholders will be in the form of cash and approximately 40% will be in the form of Berkshire common stock. This 60/40 cash-stock split is designed to comply with IRS guidelines for continuity of interest in a tax-free reorganization. For further information, please read the section titled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 90. The cash and stock elections that BNSF stockholders make with respect to their shares may be subject to proration and reallocation to achieve as closely as practicable this 60/40 cash-stock split. Accordingly, depending on the elections made by other BNSF stockholders, BNSF stockholders who elect to receive all cash for their shares in the merger may receive a portion of their consideration in Berkshire common stock, and BNSF stockholders who elect to receive all Berkshire common stock for their shares in the merger may receive a portion of their consideration in cash. BNSF stockholders who elect to receive a combination of cash and Berkshire common stock for their shares in the merger may receive cash and Berkshire common stock in a proportion different from that which they elected. The merger agreement also provides for the allocation of BNSF shares owned by stockholders who fail to make an election. If the Class A average trading value is within the collar, then any BNSF stockholder who has not made an election will be treated as having elected to receive cash or stock as necessary in order to achieve as closely as practicable the 60/40 cash-stock split. If the Class A average trading value is less than the lower end of the collar, then any BNSF stockholder who has not made an election will be deemed to have made an election to receive cash. If the Class A average trading value is above the upper end of the collar, then any BNSF stockholder who has not made an election will be deemed to have made an election to receive stock.

Berkshire expects to fund the cash component of the merger consideration (approximately $15.8 billion based on shares of BNSF common stock outstanding as of November 11, 2009) with a combination of internally generated funds (approximately 50%) and newly borrowed funds (approximately 50%).

Internally generated funds are expected to be derived primarily from cash and cash equivalents currently held in Berkshire’s insurance and other businesses. Berkshire currently expects that the amounts borrowed in connection with the payment of the cash portion of the merger consideration will be through notes issued in the

 

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public capital markets with maturities of up to three years. In addition, Berkshire has obtained commitments from commercial banking sources to provide the funding necessary to pay the cash portion of the merger consideration in the event that Berkshire’s access to the public debt markets is restricted or if Berkshire determines that the interest rates related to financing in the public debt markets debt are uneconomical.

Stockholder Elections

Not less than thirty days prior to the anticipated effective time of the merger, an election form will be mailed to each holder of record of shares of BNSF common stock as of five business days prior to the mailing date. Each election form will permit that stockholder (or the beneficial owner through customary documentation and instructions) to specify the number of shares of BNSF common stock with respect to which such holder elects to receive stock consideration, the number of shares of BNSF common stock with respect to which such holder elects to receive cash consideration or that such holder makes no election with respect to such holder’s shares of BNSF common stock.

Election forms must be received by the exchange agent (as described below) no later than 5:00 p.m., New York time, on the second business day prior to the effective time of the merger (the “election deadline”). Berkshire will publicly announce the anticipated election deadline at least five business days prior to the anticipated effective time. Any shares of BNSF common stock with respect to which the exchange agent does not receive a properly completed election form prior to the election deadline will be deemed not to have made an election. Any election form may be revoked or changed by written notice to the exchange agent, which notice must be received by the exchange agent prior to the election deadline. In the event that an election form is revoked, the shares of BNSF common stock represented by such election form will be treated as shares in respect of which no election has been made, except to the extent a subsequent election is properly made by the stockholder prior to the election deadline. Subject to the terms of the merger agreement and the election form, the exchange agent will have reasonable discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in the election forms, and any good faith decisions of the exchange agent regarding such matters will be binding and conclusive.

Payment of the Merger Consideration

Berkshire will appoint an exchange agent reasonably acceptable to BNSF to handle the consideration elections made by BNSF stockholders and to make payment of the merger consideration as contemplated by the merger agreement. When and as needed, Berkshire will cause to be deposited in trust with the exchange agent the funds and shares sufficient to pay the merger consideration to BNSF stockholders on a timely basis.

After the effective time of the merger, there will be no further registration of transfers of shares of BNSF common stock. From and after the effective time, each holder of a certificate representing shares of BNSF common stock will no longer have any rights with respect to the shares, except for the right to receive the merger consideration or as otherwise provided in the merger agreement or by applicable laws. Each share of BNSF common stock owned by Berkshire, BNSF or their respective direct or indirect wholly owned subsidiaries at the time of the merger will be canceled without any payment.

As soon as reasonably practicable after the effective time of the merger, but in no event more than five business days following the effective time, Berkshire or the exchange agent will send you a letter of transmittal and instructions advising you how to surrender your certificates in exchange for the merger consideration. The exchange agent will pay you your merger consideration as promptly as practicable after you have (1) surrendered your stock certificates to the exchange agent and (2) provided to the exchange agent your signed letter of transmittal and any other items specified by the letter of transmittal. Interest will not be paid or accrue in respect of any of the merger consideration, and the amount of any merger consideration paid to you may be reduced by the amount of any applicable withholding taxes. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

 

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If the exchange agent is to pay some or all of your merger consideration to a person other than you, you must have your certificates properly endorsed or otherwise in proper form for transfer, and you must pay any transfer or other taxes payable by reason of the transfer or establish to the exchange agent’s satisfaction that the taxes have been paid or are not required to be paid.

The transmittal instructions will tell you what to do if you have lost your certificate, or if it has been stolen or destroyed. You will have to provide an affidavit to that fact and, if required by Berkshire, post a bond in such reasonable amount that Berkshire directs as indemnity against any claim that may be made against it in respect of the certificate, upon which the exchange agent will issue the merger consideration to be paid in respect of the shares represented by such lost, stolen or destroyed certificates.

Treatment of BNSF Equity Compensation Awards

Upon completion of the merger, each outstanding stock option to acquire shares of BNSF common stock will be converted into an option to acquire, on the same terms and conditions as were applicable under such BNSF stock option, the number of shares of Berkshire Class B common stock equal to the product of the number of shares of BNSF common stock issuable upon exercise of such BNSF stock option and the “option exchange ratio,” rounded down to the nearest whole number of shares of Berkshire Class B common stock. The “option exchange ratio” means the quotient obtained by dividing the average of the daily volume-weighted average trading prices per share of BNSF common stock over the ten trading day period ending on the second full trading day prior to completion of the merger by the average of the daily volume-weighted average trading prices per share of Berkshire Class B common stock over such period. The terms of each resulting Berkshire stock option will provide for an appropriate payment, upon exercise, of cash in lieu of any fractional share of Berkshire Class B common stock lost due to rounding. The per share exercise price of each resulting Berkshire stock option will be equal to the per share exercise price for the shares of BNSF common stock otherwise purchasable pursuant to the corresponding BNSF stock option divided by the option exchange ratio, rounded up to the nearest whole cent. Any stock options that are deliverable in connection with the exercise of any resulting Berkshire stock option that has a reload feature will be adjusted in a manner consistent with the foregoing.

Upon completion of the merger, each outstanding restricted stock unit with respect to BNSF common stock will be converted into a restricted stock unit with respect to, and on the same terms and conditions as were applicable under such BNSF restricted stock unit, the number of shares of Berkshire Class B common stock equal to the product of the number of shares of BNSF common stock issuable with respect to such BNSF restricted stock unit (including any shares of “performance stock” issuable with respect to such BNSF restricted stock unit) and the option exchange ratio, rounded down to the nearest whole number of shares of Berkshire Class B common stock. The terms of each resulting Berkshire restricted stock unit will provide for an appropriate payment, upon delivery of shares thereunder, of cash in lieu of any fractional share of Berkshire Class B common stock lost due to rounding. BNSF may, based on BNSF’s Chief Executive Officer’s consultation with Berkshire’s Chairman, amend the performance criteria applicable to performance-based restricted stock units.

The merger agreement provides that BNSF will cause all restricted shares of BNSF common stock to be vested no later than ten days prior to the completion of the merger, unless such vesting would result in a breach of any BNSF equity compensation plan or award agreement or any applicable law or adverse tax consequences to any party to the merger or the holder of such BNSF restricted shares. To the extent that the vesting of any award of BNSF restricted shares is not accelerated because of any such potential breach or tax consequences, upon completion of the merger, such outstanding award of BNSF restricted shares will be converted into, on the same terms and conditions as were applicable under such BNSF award, an award of restricted shares of Berkshire Class B common stock covering a number of shares of Berkshire Class B common stock equal to the product of the number of shares of BNSF common stock underlying such BNSF award and the option exchange ratio, rounded down to the nearest whole number of shares of Berkshire Class B common stock. The terms of each resulting award of Berkshire restricted shares will provide for an appropriate payment, promptly following the completion of the merger, of cash in lieu of any fractional share of Berkshire Class B common stock lost due to rounding.

 

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To facilitate the conversion of BNSF equity compensation awards into Berkshire awards by reducing the number of fractional shares subject to the converted Berkshire awards, the merger agreement provides that Berkshire will call and hold a special meeting of its stockholders for the purpose of approving a restatement of its certificate of incorporation to increase the number of authorized shares of its Class B common stock and the total number of authorized shares of its common stock and to make other changes in order to permit a 50-for-1 split of its Class B common stock. In the event that such approval is not obtained, BNSF and Berkshire will agree on the appropriate treatment of the BNSF equity compensation awards.

Officers

Upon completion of the merger, the officers of BNSF at the time immediately before the merger is completed will remain the officers of the surviving entity after the merger. All BNSF officers will hold their positions until their successors are duly elected, appointed or qualified or until the earlier of their death, resignation or removal in accordance with the surviving entity’s certificate of formation and operating agreement.

Representations and Warranties

The merger agreement contains representations and warranties, many of which will be deemed untrue, inaccurate or incorrect as a consequence of the existence or absence of any fact, circumstance or event only if that fact, circumstance or event, individually or when taken together with other facts, circumstances or events, has had or would reasonably be expected to have a material adverse effect on the party making the representation.

The merger agreement provides that a “material adverse effect” means, with respect to BNSF, on the one hand, or Berkshire and Merger Sub, on the other hand, a material adverse effect on (i) the ability of BNSF, on the one hand, or Berkshire and Merger Sub, on the other hand, to consummate the merger or (ii) the business, results of operations or financial condition of such party and its subsidiaries, taken as a whole, except to the extent such material adverse effect under this clause (ii) results from (1) any changes in general United States or global economic conditions, (2) any changes in conditions generally affecting any of the industries in which such party and its subsidiaries operate, except to the extent such changes in conditions have a disproportionate effect on such party or its subsidiaries, taken as a whole, relative to others in such industries, (3) any decline in the market price of the common stock of such party, (4) regulatory, legislative or political conditions or securities, credit, financial or other capital markets conditions, in each case in the United States or any foreign jurisdiction, except to the extent such conditions have a disproportionate effect on such party and its subsidiaries, taken as a whole, relative to others in the industries in which such party and any of its subsidiaries operate, (5) any failure, in and of itself, by such party to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or will be, a material adverse effect), (6) the execution and delivery of the merger agreement or the public announcement or pendency of the merger or any of the other transactions contemplated by the merger agreement, including the impact thereof on the relationships, contractual or otherwise, of such party or any of its subsidiaries with employees, labor unions, customers, suppliers or partners, (7) any change in applicable law, regulation or generally accepted accounting principles (or authoritative interpretations thereof), (8) geopolitical conditions, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of the merger agreement, except to the extent such conditions or events have a disproportionate effect on such party and its subsidiaries, taken as a whole, relative to others in the industries in which such party and any of its subsidiaries operate or (9) any hurricane, tornado, flood, earthquake or other natural disaster, except to the extent such events have a disproportionate effect on such party and its subsidiaries, taken as a whole, relative to others in the industries in which such party and any of its subsidiaries operate.

 

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In the merger agreement, BNSF, Berkshire and Merger Sub each make representations and warranties to each other relating to, among other things:

 

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corporate organization, existence and capital structure;

 

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corporate power and authority to enter into and perform its obligations under, and enforceability of, the merger agreement;

 

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required regulatory filings and consents and approvals of governmental entities;

 

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the absence of conflicts with or defaults under organizational documents, debt instruments, other contracts and applicable laws and judgments;

 

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broker’s fees;

 

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the absence of certain changes since December 31, 2008;

 

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the ability to provide representations necessary to obtain the tax opinions that are closing conditions to the merger;

 

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reports and other documents required to be filed with the SEC;

 

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undisclosed liabilities; and

 

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information supplied for inclusion in this proxy statement/prospectus.

In the merger agreement, Berkshire and Merger Sub also make representations and warranties relating to the availability of the funds necessary to perform their obligations under the merger agreement, the interim operations of Merger Sub and Berkshire and its subsidiaries’ ownership of BNSF common stock.

In the merger agreement, BNSF also makes representations and warranties relating to, among other things:

 

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litigation;

 

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compliance with applicable laws;

 

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compliance with the Employee Retirement Income Securities Act of 1974, as amended, and other employee benefit matters;

 

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environmental matters;

 

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applicability of state takeover statutes;

 

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title to properties;

 

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tax matters;

 

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contracts with affiliates;

 

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the BNSF Board’s approval of the merger agreement and the transactions contemplated thereby, including the merger, and its recommendation to BNSF stockholders to approve and adopt the merger agreement and the transactions contemplated thereby, including the merger; and

 

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receipt of fairness opinions from Goldman Sachs and Evercore.

Conduct of Business Pending the Merger

BNSF has agreed in the merger agreement that, until the effective time of the merger, except as expressly contemplated or permitted by the merger agreement, required by applicable law or consented to in writing by Berkshire, BNSF and each of its subsidiaries will, in all material respects (and subject to certain exceptions):

 

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conduct its respective business in the usual, regular and ordinary course consistent with past practice; and

 

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use all reasonable efforts to maintain and preserve intact its business organization and the good will of those having business relationships with it and to retain the services of its respective present officers and key employees.

 

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BNSF has also agreed that, until the effective time of the merger, except as expressly contemplated or permitted by the merger agreement, required by applicable law or consented to in writing by Berkshire, BNSF will not, and will not permit any of its subsidiaries to (subject to certain exceptions):

 

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issue, sell, grant, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale, disposition or pledge or other encumbrance of (a) any additional shares of capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any shares of capital stock, or any rights, warrants, options, calls, commitments or any other agreements of any character to purchase or acquire any shares of capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of capital stock of BNSF or any of its subsidiaries, or (b) any other securities in respect of, in lieu of, or in substitution for, any shares of capital stock or stock options of BNSF or any of its subsidiaries outstanding on the date of the merger agreement, other than, in each case, the issuance of shares of common stock pursuant to the exercise of any stock options or rights under BNSF’s Employee Stock Purchase Program or its Discounted Stock Purchase Program, or the vesting of restricted stock units, in each case outstanding as of the date of the merger agreement, the issuance of stock options (and the issuance of shares of common stock pursuant to the exercise of such stock options) pursuant to the exercise of existing stock options with a “reload” feature, the issuance of rights under the Employee Stock Purchase Program and the Discounted Stock Purchase Program in the ordinary course of business consistent with past practice (and the issuance of shares of common stock pursuant to the exercise of such rights), and the issuance of shares of common stock pursuant to BNSF’s Investment and Retirement Plan;

 

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accelerate the vesting of any stock options, restricted stock units or restricted shares, except as may be required pursuant to the terms of such stock options, restricted stock units or restricted shares;

 

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redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any outstanding shares of capital stock of BNSF or any of its subsidiaries other than pursuant to the benefits plans of BNSF or its subsidiaries;

 

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split, combine, subdivide or reclassify any shares of its capital stock or declare, set aside for payment or pay any dividend, or make any other actual, constructive or deemed distribution, in respect of any shares of capital stock or otherwise make any payments to stockholders in their capacity as such other than its ordinary course quarterly dividends and a pro rated dividend with respect to the first quarter of 2010 if necessary to ensure that the portion of that dividend is paid on the closing date;

 

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other than in the ordinary course of business consistent with past practice or pursuant to contracts or agreements in force on the date of the merger agreement, incur any indebtedness for borrowed money or guarantee any such indebtedness or make any loans, advances or capital contributions to, or investments in, any person other than BNSF or its direct or indirect wholly owned subsidiaries;

 

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sell, transfer, mortgage, encumber or otherwise dispose of any of its properties or assets with a minimum value in excess of $100 million to any individual, corporation or other entity other than a direct or indirect wholly owned subsidiary, or cancel, release or assign any indebtedness in excess of $100 million or any claims related thereto, in each case that is material to BNSF and its subsidiaries, taken as a whole, except (a) in the ordinary course of business consistent with past practice, or (b) pursuant to contracts or agreements in force on the date of the merger agreement;

 

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other than in the ordinary course of business consistent with past practice, make any material acquisition or investment in a business either by purchase of stock or securities, merger or consolidation, contributions to capital, loans, advances, property transfers, or purchases of any property or assets of any other individual, corporation or other entity other than a direct or indirect wholly owned subsidiary of BNSF except pursuant to contracts or agreements in force on the date of the merger agreement;

 

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increase in any manner the compensation of any directors, officers or employees or enter into, establish, amend or terminate any employee benefit plan, for or in respect of, any stockholder, officer, director, other employee, agent, consultant or affiliate other than (i) as required pursuant to the terms of

 

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agreements or plans in effect on the date of the merger agreement, and (ii) increases in salaries, wages and benefits of employees who are not directors or executive officers made in the ordinary course of business and in a manner consistent with past practice;

 

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amend the charter, bylaws or similar organizational documents of BNSF or any of its subsidiaries; or

 

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make any commitment to take any of the above prohibited actions.

Efforts to Complete the Merger

Subject to the terms and conditions set forth in the merger agreement, each of Berkshire and BNSF have agreed to, and to cause its subsidiaries to, use all reasonable best efforts to (a) take, or cause to be taken, all actions that are necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or its subsidiaries with respect to the merger, and, subject to the closing conditions discussed below, to consummate the merger as soon as practicable and (b) obtain, and cooperate with the other party to obtain, any consent, authorization or order from or approval of, or any exemption by, any governmental entity and any other third party required to be obtained by the merger agreement and to comply with the terms and conditions thereof. Subject to the terms and conditions of the merger agreement, Berkshire and BNSF have agreed to use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, as soon as practicable, the transactions contemplated by the merger agreement, including using all reasonable efforts to (a) lift or rescind any injunction or restraining or other order adversely affecting the ability of the parties to complete the merger and (b) defend any litigation seeking to enjoin, prevent or delay the completion of the merger or seeking material damages.

Neither Berkshire nor any of its subsidiaries or affiliates, however, is required under the merger agreement to agree to any of the following to complete the merger:

 

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any prohibition of or limitation on the ownership (or any limitation that would materially affect its or their operation) of any portion of their respective businesses or assets;

 

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divest, hold separate or otherwise dispose of any portion of its or their respective businesses or assets;

 

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any limitation on its or their ability to effect the merger or on the ability of BNSF or Merger Sub or its or their respective subsidiaries to acquire, hold or exercise full rights of ownership of any shares of any material subsidiary of BNSF; or

 

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any other limitation on its or their ability to effectively control their respective businesses, or any limitation that would materially affect its or their ability to control their respective operations.

Indemnification

From and after the effective time of the merger and subject to certain limitations described in the merger agreement, Berkshire will, and will cause the surviving entity in the merger to, indemnify, defend and hold harmless, for a period of six years after the effective time of the merger, each person who has served as an officer or director of BNSF or any of its subsidiaries against any and all losses, claims, damages, costs, expenses, fines, liabilities, judgments or amounts paid in settlement with the approval of the indemnifying party, that result from any claim, action, suit, proceeding or investigation (a) based in whole or in part on, or arising in whole or in part out of, the fact that such person is or was a director or officer of BNSF or any of its subsidiaries, whether pertaining to any action or omission existing or occurring at or prior to the effective time of the merger and whether asserted or claimed prior to, at or after the effective time and (b) based in whole or in part on, arising in whole or in part out of, or pertaining to the merger agreement of the transactions contemplated thereby.

 

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Conditions to the Merger

Conditions to Each Party’s Obligations. Each party’s obligation to complete the merger is subject to the satisfaction or waiver of the following conditions:

 

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the merger agreement shall have been adopted by the affirmative vote of (i) the holders of at least 66-2/3% of the issued and outstanding shares of BNSF common stock not owned by Berkshire or any of its affiliates or associates and (ii) the holders of a majority of the issued and outstanding shares of BNSF common stock;

 

•

the shares of Berkshire Class A and Class B common stock issuable to BNSF stockholders as consideration in the merger shall have been approved for listing on the NYSE, subject to official notice of issuance;

 

•

no statute, rule, regulation, judgment, order or injunction shall have been promulgated, entered, enforced, enacted, or issued or be applicable to the merger by any governmental entity that prohibits, restrains, or makes illegal the completion of the merger;

 

•

the Registration Statement on Form S-4 (of which this proxy statement/prospectus is a part) shall have become effective under the Securities Act and shall not be the subject of any stop order or proceeding seeking a stop order;

 

•

the waiting period under the HSR Act shall have expired or been terminated, any approvals from governmental entities regarding FCC licenses required for the continuing utilization of such licenses following the merger by the surviving entity and its subsidiaries shall have been obtained and all other material governmental consents, orders, approvals and waiting periods required for the completion of the merger shall have been obtained and shall be in effect, or, with respect to waiting periods, shall have expired or been terminated; and

 

•

all material filings with governmental entities required for the consummation of the merger and the other transactions contemplated by the merger agreement shall have been made.

Conditions to Berkshire’s and Merger Sub’s Obligations. The obligation of Berkshire and Merger Sub to complete the merger is subject to the satisfaction or waiver of the following further conditions:

 

•

the representations and warranties of BNSF that are qualified by materiality must be true and correct in all respects, and all other representations and warranties that are not so qualified must be true and correct in all material respects, in each case as of the date of the merger agreement and as of the closing date, except representations and warranties that speak as of a particular date, and Berkshire and Merger Sub must have received a certificate to this effect signed by the chief executive officer and chief financial officer of BNSF;

 

•

BNSF must have performed or complied with all of its material obligations, agreements and covenants under the merger agreement, and Berkshire and Merger Sub must have received a certificate to this effect signed by the chief executive officer and chief financial officer of BNSF; and

 

•

no statute, rule, regulation, judgment, order or injunction shall have been promulgated, entered, enforced, enacted or issued or be applicable to the merger by any governmental entity that:

 

•

prohibits or imposes any limitations on, Berkshire’s or its subsidiaries’ or affiliates’ ownership (or which imposes any limitations that would materially affect its or their operation) of any portion of their respective businesses or assets;

 

•

imposes any requirement to divest, hold separate or otherwise dispose of any portion of their respective businesses or assets;

 

•

prohibits or imposes any limitation on its or their ability to effect the merger, or the ability of Berkshire or its subsidiaries to acquire or hold or exercise full rights of ownership of any capital stock of any material subsidiary of BNSF; or

 

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imposes limitations on its or their ability to effectively control their respective businesses or any limitation which would materially affect its or their ability to control their respective operations, and no action or proceeding by any governmental entity shall be pending that seeks any of these results;

 

•

Berkshire shall have received an opinion of its tax counsel dated as of the closing date to the effect that for U.S. Federal income tax purposes the merger will qualify as a reorganization within the meaning of Section 368 of the Code and that each of Berkshire, the direct owner of Merger Sub and BNSF will be a party to the reorganization within the meaning of Section 368(b) of the Code; and

 

•

The holders of BNSF stock options and restricted stock units shall no longer have the right to acquire any equity securities of BNSF or its subsidiaries after the effective time of the merger.

Conditions to BNSF’s Obligations. BNSF’s obligation to complete the merger is subject to the satisfaction or waiver of the following further conditions:

 

•

the representations and warranties of Berkshire and Merger Sub that are qualified by materiality must be true and correct in all respects, and all other representations and warranties that are not so qualified must be true and correct in all material respects, in each case as of the date of the merger agreement and as of the closing date, except representations and warranties that speak as of a particular date, and BNSF must have received a certificate to this effect signed by an officer of Berkshire;

 

•

Berkshire and Merger Sub must have performed or complied with all of their material obligations, agreements and covenants under the merger agreement, and BNSF must have received a certificate to this effect signed by an officer of Berkshire; and

 

•

BNSF shall have received an opinion of its tax counsel dated as of the closing date to the effect that for U.S. Federal income tax purposes the merger will qualify as a reorganization within the meaning of Section 368 of the Code and that each of Berkshire, the direct owner of Merger Sub and BNSF will be a party to the reorganization within the meaning of Section 368(b) of the Code.

No Solicitations of Other Offers

The merger agreement provides that neither BNSF nor any of its subsidiaries nor its or their representatives will, except as described below:

 

•

solicit, initiate or knowingly encourage, or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any takeover proposal, (as described below); or

 

•

participate in any discussions or negotiations regarding a takeover proposal.

BNSF may, however, in response to an unsolicited bona fide written takeover proposal that is made after the date of the merger agreement in circumstances not otherwise involving a breach of the merger agreement, and which proposal is a superior proposal (as described below) or is reasonably expected to lead to a superior proposal, if the BNSF Board determines in good faith, after considering applicable state law and consultation with outside counsel, that a failure to do so would be inconsistent with its fiduciary duties to BNSF stockholders under applicable law:

 

•

request information from the party making that takeover proposal for the sole purpose of the BNSF Board informing itself about the takeover proposal and the party making it;

 

•

furnish information regarding BNSF to the person making that takeover proposal pursuant to a customary confidentiality agreement, provided that such confidentiality agreement may not include any provision calling for an exclusive right to negotiate with BNSF and BNSF advises Berkshire of the nonpublic information it delivers to the third party making the takeover proposal; and

 

•

participate in negotiations with the party making that takeover proposal regarding that takeover proposal.

 

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In addition, BNSF has agreed that neither the BNSF Board nor any of its committees will, except as described below:

 

•

withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Berkshire, the approval of, determination of advisability of, or recommendation with respect to, the merger agreement and the transactions contemplated by that agreement, including the merger;

 

•

approve, determine to be advisable, or recommend, or propose publicly to approve, determine to be advisable, or recommend, any takeover proposal; or

 

•

cause BNSF to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any takeover proposal (other than a customary confidentiality agreement referred to above).

However, the BNSF Board may, (a) if it determines in good faith, in response to a superior proposal that was unsolicited and made after the date of the merger agreement in circumstances not otherwise involving a breach of the merger agreement, after considering applicable state law and consultation with outside counsel, that the failure to do so would be inconsistent with its fiduciary duties to BNSF stockholders under applicable law, and (b) if BNSF has given Berkshire two business days’ prior written notice of the receipt of the superior proposal, the material terms and conditions of the superior proposal, the identity of the person making the superior proposal and the action the board of directors has determined to take:

 

•

withdraw or modify its approval, determination of advisability, or recommendation of the merger agreement and the transactions contemplated by that agreement, including the merger;

 

•

approve, determine to be advisable or recommend a superior proposal; or

 

•

cause BNSF to enter into an agreement related to the superior proposal, provided that BNSF concurrently terminates the merger agreement and pays Berkshire the termination fee described below.

In addition, the BNSF Board may at any time (other than in connection with a takeover proposal) withdraw or modify its approval, determination of advisability or recommendation of the merger agreement and the transactions contemplated by that agreement, including the merger, if it determines in good faith, after considering applicable state law and consultation with outside counsel, that any such withdrawal or modification is required in order for it to comply with its fiduciary duties to BNSF stockholders under applicable law, so long as BNSF has given Berkshire five business days’ prior written notice of the BNSF Board’s intention to take any such actions and its reasons for doing so.

BNSF has also agreed to cease any discussion or negotiations with any third parties that may have been ongoing on the date of the merger agreement with respect to a takeover proposal, and to notify Berkshire of any request for confidential information in connection with a takeover proposal or of any takeover proposal, its material terms and conditions, including the identity of the party making the request or the takeover proposal, and to keep Berkshire promptly advised of all significant developments which could reasonably be expected to culminate in the BNSF Board withdrawing, modifying or amending its recommendation of the merger agreement and the transactions contemplated by that agreement, including the merger.

Nothing described above prohibits BNSF from taking and disclosing a position contemplated by certain rules under the Exchange Act or from making any disclosure to its stockholders, provided that neither BNSF, the BNSF Board nor any committee thereof shall withdraw or modify, or publicly propose to withdraw or modify, its approval, determination of advisability or recommendation of the merger agreement and the transactions contemplated by that agreement, including the merger, or approve, determine to be advisable, or recommend, or propose publicly to approve, determine to be advisable, or recommend, a takeover proposal, except in accordance with the procedures described above.

 

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For purposes of this discussion, the term “takeover proposal” means any inquiry, proposal or offer from any person (other than Berkshire and its subsidiaries, affiliates and representatives) relating to:

 

•

any direct or indirect acquisition or purchase of 10% or more of the consolidated assets (including equity interests in subsidiaries) of BNSF and its subsidiaries, taken as a whole, or 10% or more of any class of equity securities of BNSF;

 

•

any tender offer or exchange offer that if consummated would result in any person beneficially owning 10% or more of any class of equity securities of BNSF; or

 

•

any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving BNSF or any of its subsidiaries,

in each case other than the transactions contemplated by the merger agreement.

For purposes of this discussion, the term “superior proposal” means:

 

•

any bona fide written offer from any person (other than Berkshire and its subsidiaries, affiliates and representatives) for a direct or indirect acquisition or purchase of 50% or more of the consolidated assets (including equity interests in subsidiaries) of BNSF and its subsidiaries, taken as a whole, or 50% or more of any class of equity securities of BNSF;

 

•

any tender offer or exchange offer that if consummated would result in any person beneficially owning 50% or more of any class of equity securities of BNSF; or

 

•

any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving BNSF or any of its subsidiaries,

in each case other than the transactions contemplated by the merger agreement, which (a) considering all relevant factors, is more favorable to BNSF and its stockholders than the merger, and (b) for which the third party has demonstrated that the financing for its offer is fully committed or reasonably likely to be obtained, in each case as determined by the BNSF Board in its good faith judgment after receiving the advice of independent financial advisors and outside counsel.

Termination of the Merger Agreement

The merger agreement may be terminated at any time prior to the completion of the merger, whether before or after stockholder approval has been obtained:

 

•

by mutual consent of BNSF and Berkshire;

 

•

by either BNSF or Berkshire if:

 

•

any final, non-appealable governmental order, decree, ruling or other action prohibits the completion of the merger, except that the party seeking to terminate (subject to certain limitations in the case of Berkshire) shall have used all reasonable best efforts to challenge that order, decree, ruling or other action;

 

•

the merger is not completed on or before June 30, 2010, except that (a) this right to terminate will not be available to any party whose failure to comply with the merger agreement results in the failure of the merger to be completed by that date, and (b) this date will be extended day-by-day for each day any party is subject to a nonfinal order, decree, ruling or action restraining, enjoining or otherwise prohibiting the consummation of the merger, provided that this date may not be extended beyond July 31, 2010; or

 

•

BNSF’s stockholders, at the special meeting or at any adjournment thereof, fail to adopt the merger agreement by the required votes; or

 

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•

by Berkshire if:

 

•

the BNSF Board or any committee thereof withdraws or modifies, or proposes publicly to withdraw or modify, in a manner adverse to Berkshire, its approval, determination of advisability or recommendation of the merger agreement and the transactions contemplated by that agreement, including the merger, or approves, determines to be advisable or recommends, or proposes publicly to approve, determine to be advisable or recommend, any takeover proposal, or resolves to take any such action; or

 

•

any of BNSF’s representations or warranties qualified by materiality are not true and correct in any respect or, with respect to those not qualified by materiality, are not true and correct in all material respects, or BNSF shall have breached or failed in any material respect to perform or comply with any of its material obligations, agreements or covenants under the merger agreement where that inaccuracy or breach is incapable of being cured or has not been cured within 30 business days after Berkshire delivers written notice of the inaccuracy or breach to BNSF; or

 

•

by BNSF if:

 

•

BNSF enters into a definitive agreement providing for a superior proposal, provided that BNSF has complied with the provisions of the merger agreement described above under “The Merger Agreement—No Solicitation of Other Offers,” and provided that BNSF has paid or simultaneously with so doing pays to Berkshire the $264 million termination fee and certain of its out-of-pocket expenses as described below; or

 

•

any of Berkshire’s representations or warranties qualified by materiality are not true and correct in any respect or, with respect to those not qualified by materiality, are not true and correct in all material respects, or either Berkshire or Merger Sub shall have breached or failed in any material respect to perform or comply with any of its material obligations, agreements or covenants under the merger agreement where that inaccuracy or breach is incapable of being cured or has not been cured within 30 business days after BNSF delivers written notice of the inaccuracy or breach to Berkshire.

Termination Fee

BNSF has agreed to pay Berkshire a termination fee of $264 million and reimburse Berkshire for any SEC filing fees previously paid by Berkshire or Merger Sub in connection with the transactions contemplated by the merger agreement if the merger agreement is terminated under any of the following circumstances:

 

•

a takeover proposal shall have been made known to BNSF or shall have been made directly to BNSF stockholders generally or any person shall have publicly announced an intention to make a takeover proposal and thereafter either party terminates the merger agreement because:

 

•

the merger has not been completed by June 30, 2010 (as such date may be extended as described above under “The Merger Agreement—Termination of the Merger Agreement”);

 

•

the stockholder approvals necessary to complete the merger are not obtained at the special meeting of BNSF stockholders or any adjournment thereof, as described above under “The Merger Agreement—Termination of the Merger Agreement;” or

 

•

there exists a final non-appealable governmental order, decree or ruling based on the existence of the takeover proposal; and

that takeover proposal is consummated within one year of the termination;

 

•

BNSF terminates the merger agreement because it enters into a definitive agreement providing for a superior proposal, as described above under “The Merger Agreement—Termination of the Merger Agreement;” or

 

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•

Berkshire terminates the merger agreement because the BNSF Board or any committee thereof withdraws or modifies, or proposes publicly to withdraw or modify, in a manner adverse to Berkshire, its approval, determination of advisability or recommendation of the merger agreement and the transactions contemplated by that agreement, including the merger, or approves, determines to be advisable or recommends, or proposes publicly to approve, determine to be advisable or recommend, any takeover proposal or resolves to take any such action, as described above under “The Merger Agreement—Termination of the Merger Agreement.”

For purposes of this discussion, the term “takeover proposal” has the same meaning as that set forth under “The Merger Agreement—No Solicitations of Other Offers” above, except that references to “10%” in that definition shall be deemed to be references to “50%.”

Employee Benefits

Berkshire has agreed to honor and cause the surviving entity to honor all of BNSF’s employee benefit plans and arrangements. In addition, Berkshire has agreed to provide, for a period of two years after the completion of the merger, compensation and benefits to employees and former employees of BNSF and its subsidiaries no less favorable in the aggregate than the compensation and benefits provided immediately prior to the completion of the merger. This agreement shall not, however, restrict Berkshire or the surviving entity from making changes that are consistent with changes currently planned or contemplated by BNSF, are in response to business conditions which may exist at the time of such changes or are collectively bargained for. Furthermore, the surviving entity and its subsidiaries will not, after the completion of the merger, provide any form of equity-based compensation, including options to purchase shares of stock of the surviving entity or any of its subsidiaries; provided that any equity-based compensation provided by BNSF and its subsidiaries pursuant to the benefits plans of BNSF or its subsidiaries immediately prior to the completion of the merger shall be taken into account in determining whether the compensation and benefits provided by Berkshire and the surviving entity are less favorable than those provided by BNSF immediately prior to completion of the merger.

Amendment, Extension and Waiver

The parties may amend the merger agreement at any time before completion of the merger. All amendments to the merger agreement must be in writing signed by BNSF, Berkshire and Merger Sub.

At any time before the completion of the merger, each of the parties to the merger agreement may, by written instrument:

 

•

extend the time for the performance of any of the obligations or other acts of the other parties;

 

•

waive any inaccuracies in the representations and warranties of the other parties contained in the merger agreement or in any document delivered pursuant to the merger agreement; or

 

•

waive compliance with any of the agreements or conditions contained in the merger agreement.

However, after approval of the merger agreement by the BNSF stockholders, no amendment or waiver may be made which by law requires further approval by BNSF stockholders, unless BNSF obtains that further approval. Under Delaware law, after the merger agreement has been adopted by the BNSF stockholders, the merger consideration cannot be changed and the merger agreement cannot be altered in a manner adverse to BNSF stockholders without re-submitting the revisions to the BNSF stockholders for their approval.

 

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ACCOUNTING TREATMENT

In accordance with accounting principles generally accepted in the United States, Berkshire will account for the merger using the acquisition method of accounting for business combinations. Under this method of accounting, Berkshire will record the acquisition based on the fair value of the consideration given, which includes the market value of its stock issued in connection with the merger (based on the closing price of Berkshire’s Class A and Class B common stock on the closing date of the merger), the cash consideration paid in the merger and the fair value of the BNSF shares already owned by Berkshire and its affiliates at the time of the merger. Berkshire will allocate the purchase price to the identifiable assets acquired and liabilities assumed based on their respective fair values at the date of the completion of the merger. Any excess of the value of consideration paid plus the fair value of the shares of BNSF common stock already owned by Berkshire and its affiliates over the aggregate fair value of those net assets will be recorded as goodwill.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

General

The following is a summary of the material U.S. Federal income tax consequences of the merger. This discussion is based upon the Code, Treasury regulations, judicial authorities, published positions of the Internal Revenue Service (“IRS”), and other applicable authorities, all as currently in effect and all of which are subject to change or differing interpretations (possibly with retroactive effect). This discussion is limited to U.S. holders (as defined below) who hold their shares of BNSF common stock as capital assets for U.S. Federal income tax purposes (generally, assets held for investment). This discussion does not address the tax consequences applicable to BNSF stockholders who are not U.S. holders, nor does it address all of the tax consequences that may be relevant to particular U.S. holders who are subject to special treatment under U.S. Federal income tax laws, including, without limitation, financial institutions, insurance companies, partnerships and other pass-through entities, tax-exempt organizations, regulated investment companies, real estate investment trusts, dealers in securities or currencies, U.S. persons whose functional currency is not the U.S. dollar, traders in securities that elect to use a mark-to-market method of accounting, persons that hold BNSF common stock as part of a straddle, hedge, constructive sale or conversion transaction, and U.S. holders who acquired their shares of BNSF common stock through the exercise of an employee stock option or otherwise as compensation.

If a partnership or other entity taxed as a partnership holds BNSF common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. Partnerships holding BNSF common stock and partners in such partnerships should consult their tax advisors about the tax consequences of the merger to them.

This discussion does not address the tax consequences of the merger under state, local or foreign tax laws. This discussion also does not address the tax consequences of any transaction other than the merger.

BNSF STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL (INCLUDING THE ALTERNATIVE MINIMUM TAX), STATE, LOCAL OR FOREIGN AND OTHER TAX LAWS AND OF CHANGES IN THOSE LAWS.

For purposes of this section, the term “U.S. holder” means a beneficial owner of BNSF common stock that for U.S. Federal income tax purposes is (1) an individual who is a citizen or resident of the United States, (2) a corporation, or other entity treated as a corporation for U.S. Federal income tax purposes, created or organized in or under the laws of the United States or any state or the District of Columbia, (3) an estate that is subject to U.S. Federal income tax on its income regardless of its source, or (4) a trust (i) the substantial decisions of which are controlled by one or more U.S. persons and which is subject to the primary supervision of a U.S. court, or (ii) that has validly elected under applicable Treasury regulations to be treated as a U.S. person for U.S. Federal income tax purposes.

Tax Consequences of the Merger Generally

The obligations of Berkshire and BNSF to complete the merger are conditioned on, among other things, the receipt by each of Berkshire and BNSF of tax opinions from Munger Tolles and Cravath, respectively, dated the closing date of the merger, to the effect that for U.S. Federal income tax purposes the merger will qualify as a reorganization within the meaning of Section 368 of the Code and that each of Berkshire, NICO and BNSF will be a party to the reorganization within the meaning of Section 368(b) of the Code. These opinions will be subject to customary qualifications and assumptions, including that the merger will be completed according to the terms of the merger agreement. In rendering the tax opinions, each counsel may require and rely on representations of Berkshire, NICO, BNSF, and their affiliates, to be delivered at the time of closing. If any such assumption or representation is or becomes inaccurate, the U.S. Federal income tax consequences of the merger could be

 

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adversely affected. Neither of these tax opinions will be binding on the IRS. Neither Berkshire nor BNSF intends to request any ruling from the IRS as to the U.S. Federal income tax consequences of the merger. Consequently, no assurance can be given that the IRS will not assert, or that a court will not sustain, a position contrary to any of the tax consequences set forth below or any of the tax consequences described in the tax opinions.

The following discussion assumes that the merger qualifies as a reorganization within the meaning of Section 368 of the Code and that each of Berkshire, NICO and BNSF is a party to the reorganization within the meaning of Section  368(b) of the Code.

Tax Consequences of the Merger for Berkshire, Berkshire Stockholders and BNSF

No gain or loss will be recognized by Berkshire, Berkshire stockholders, or BNSF.

Tax Consequences of the Merger for U.S. Holders of BNSF Common Stock

The U.S. Federal income tax consequences of the merger to a U.S. holder of BNSF common stock will depend on whether such U.S. holder receives cash, shares of Berkshire common stock or a combination of cash and stock in exchange for such U.S. holder’s BNSF common stock. At the time a U.S. holder makes a cash or stock election pursuant to the terms of the merger agreement, such U.S. holder will not know whether, and to what extent, the proration provisions of the merger agreement will alter the mix of consideration such U.S. holder will receive. As a result, the tax consequences to such U.S. holder will not be ascertainable with certainty until such U.S. holder knows the precise amount of cash and shares of Berkshire common stock that such U.S. holder will receive pursuant to the merger.

Exchange of BNSF common stock solely for Berkshire common stock

Except as discussed below, see “—Cash in Lieu of Fractional Shares of Berkshire Common Stock,” a U.S. holder who exchanges all of its shares of BNSF common stock solely for shares of Berkshire common stock in the merger will not recognize gain or loss in connection with such exchange.

A U.S. holder’s aggregate tax basis in the Berkshire common stock received in the merger, including any fractional shares deemed received by the U.S. holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares of Berkshire Common Stock,” generally will equal such U.S. holder’s aggregate tax basis in the BNSF common stock surrendered by such U.S. holder in the merger. The holding period for the shares of Berkshire common stock received by such U.S. holder in the merger, including any fractional shares deemed received by the U.S. holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares of Berkshire Common Stock,” generally will include the holding period for the shares of BNSF common stock exchanged therefor.

Exchange of BNSF common stock solely for cash

A U.S. holder who exchanges all of its shares of BNSF common stock solely for cash in the merger generally will recognize capital gain or loss equal to the difference between the amount of cash received by such U.S. holder and the U.S. holder’s adjusted tax basis in the BNSF common stock exchanged therefor.

Any capital gain or loss generally will be long-term capital gain or loss if the U.S. holder held the shares of BNSF common stock for more than one year at the effective time of the merger. Currently, long-term capital gains of an individual generally are subject to a maximum U.S. Federal income tax rate of 15% and short-term capital gains of an individual generally are subject to a maximum U.S. Federal income tax rate of 35%. The deductibility of capital losses is subject to limitations.

 

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Exchange of BNSF common stock for a combination of Berkshire common stock and cash

Except as discussed below, see “—Cash in Lieu of Fractional Shares of Berkshire Common Stock,” a U.S. holder who exchanges shares of BNSF common stock for a combination of Berkshire common stock and cash will recognize gain (but not loss) equal to the lesser of (i) the excess, if any, of the amount of cash plus the fair market value of any Berkshire common stock received in the merger, over such U.S. holder’s adjusted tax basis in the shares of BNSF common stock surrendered by such U.S. holder in the merger and (ii) the amount of cash received by such U.S. holder in the merger (other than cash received in lieu of fractional shares of Berkshire common stock). For purposes of this calculation, the fair market value of Berkshire common stock is based on the trading price of that stock on the date of the merger, rather than on the ten-day average price used in calculating the number of shares of Berkshire common stock to be issued to the stockholder.

In the case of any U.S. holder who acquired different blocks of BNSF common stock at different times and at different prices, any realized gain or loss will be determined separately for each identifiable block of shares exchanged in the merger, and a loss realized on the exchange of one block of shares cannot be used to offset a gain realized on the exchange of another block of shares. Such U.S. holder should consult its tax advisor prior to the exchange with regard to identifying the bases or holding periods of the particular shares of Berkshire common stock received in the merger.

Generally, a U.S. holder’s aggregate tax basis in the Berkshire common stock received by such U.S. holder in the merger, including any fractional shares deemed received by the U.S. holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares of Berkshire Common Stock,” will equal such U.S. holder’s aggregate tax basis in the BNSF common stock surrendered in the merger, increased by the amount of taxable gain or dividend income (see below), if any, recognized by such U.S. holder in the merger (other than with respect to cash received in lieu of fractional shares of Berkshire common stock), and decreased by the amount of cash, if any, received by such U.S. holder in the merger (other than cash received in lieu of fractional shares of Berkshire common stock). The holding period for the shares of Berkshire common stock received in the merger, including any fractional shares deemed received by the U.S. holder under the treatment discussed below in “—Cash in Lieu of Fractional Shares of Berkshire Common Stock,” generally will include the holding period for the shares of BNSF common stock exchanged therefor.

Any capital gain generally will be long-term capital gain if the U.S. holder held the shares of BNSF common stock for more than one year at the effective time of the merger. Currently, long-term capital gains of an individual generally are subject to a maximum U.S. Federal income tax rate of 15% and short term capital gains of an individual generally are subject to a maximum U.S. Federal income tax rate of 35%. In some cases, such as if a U.S. holder actually or constructively owns Berkshire common stock immediately after the merger, such gain may be treated as having the effect of the distribution of a dividend to such U.S. holder, under the tests set forth in Section 302 of the Code, in which case such gain would be treated as ordinary dividend income. These rules are complex and dependent upon the specific factual circumstances particular to each U.S. holder. Consequently, each U.S. holder that may be subject to those rules should consult its tax advisor as to the application of these rules to the particular facts relevant to such U.S. holder.

Cash in Lieu of Fractional Shares of Berkshire Common Stock

A U.S. holder who receives cash instead of a fractional share of Berkshire common stock will be treated as having received the fractional share of Berkshire common stock pursuant to the merger and then as having exchanged the fractional share of Berkshire common stock for cash in a redemption by Berkshire. In general, this deemed redemption will be treated as a sale or exchange and a U.S. holder will recognize gain or loss equal to the difference between (i) the amount of cash received by such U.S. holder and (ii) the portion of the basis of the shares of BNSF common stock allocable to such fractional interest. Such gain or loss generally will constitute capital gain or loss and will be long-term capital gain or loss if the U.S. holder’s holding period for the BNSF common stock exchanged by such U.S. holder is greater than one year as of the effective time. The deductibility of capital losses is subject to limitations.

 

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Information Reporting and Backup Withholding

Cash payments received in the merger by a U.S. holder may, under certain circumstances, be subject to information reporting and backup withholding at a rate of 28% of the cash payable to the U.S. holder, unless the U.S. holder provides proof of an applicable exemption, furnishes its taxpayer identification number (in the case of individuals, their social security number) and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from payments to a U.S. holder under the backup withholding rules are not additional tax and will be allowed as a refund or credit against the U.S. holder’s U.S. Federal income tax liability, provided the required information is timely furnished to the IRS.

Reporting Requirements

A U.S. holder who receives shares of Berkshire common stock as a result of the merger will be required to retain records pertaining to the merger. Each U.S. holder who is required to file a U.S. tax return and who is a “significant holder” that receives Berkshire common stock in the merger will be required to file a statement with the significant holder’s U.S. Federal income tax return setting forth such significant holder’s basis (determined immediately before the exchange) in the BNSF common stock surrendered and the fair market value (determined immediately before the exchange) of the BNSF common stock that is exchanged by such significant holder. Generally, a “significant holder” is a U.S. holder who receives shares of Berkshire common stock in the merger and who, immediately before the merger, owned at least 5% of the outstanding stock of BNSF (by vote or value) or securities of BNSF with a tax basis of $1 million or more.

 

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THE COMPANIES

Berkshire Hathaway Inc. and R Acquisition Company, LLC

Berkshire, a Delaware corporation, is a holding company owning subsidiaries that engage in a number of diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, services and retailing. Included in the group of subsidiaries that underwrite property and casualty insurance and reinsurance is GEICO, the third largest auto insurer in the United States and two of the largest reinsurers in the world, General Re and the Berkshire Reinsurance Group. Other subsidiaries that underwrite property and casualty insurance include NICO, Medical Protective Company, Applied Underwriters, U.S. Liability Insurance Company, Central States Indemnity Company, Kansas Bankers Surety, Cypress Insurance Company, Boat U.S. and several other subsidiaries referred to as the “Homestate Companies.”

MidAmerican Energy Holdings Company is an international energy holding company owning a wide variety of operating companies engaged in the generation, transmission and distribution of energy. Among MidAmerican’s operating energy companies are Northern Electric and Yorkshire Electricity; MidAmerican Energy Company; Pacific Power and Rocky Mountain Power; and Kern River Gas Transmission Company and Northern Natural Gas. In addition, MidAmerican owns HomeServices of America, a real estate brokerage firm. Berkshire’s finance and financial products businesses primarily engage in proprietary investing strategies (BH Finance), commercial and consumer lending (Berkshire Hathaway Credit Corporation and Clayton Homes) and transportation equipment and furniture leasing (XTRA and CORT). McLane Company is a wholesale distributor of groceries and nonfood items to convenience stores, wholesale clubs, mass merchandisers, quick service restaurants and others. The Marmon Group is an international association of approximately 130 manufacturing and service businesses that operate independently within diverse business sectors. Shaw Industries is the world’s largest manufacturer of tufted broadloom carpet.

Numerous business activities are conducted through Berkshire’s other manufacturing, services and retailing subsidiaries. Benjamin Moore is a formulator, manufacturer and retailer of architectural and industrial coatings. Johns Manville is a leading manufacturer of insulation and building products. Acme Building Brands is a manufacturer of face brick and concrete masonry products. MiTek Inc. produces steel connector products and engineering software for the building components market. Fruit of the Loom, Russell, Vanity Fair, Garan, Fechheimer, H.H. Brown Shoe Group and Justin Brands manufacture, license and distribute apparel and footwear under a variety of brand names. FlightSafety International provides training to aircraft and ship operators. NetJets provides fractional ownership programs for general aviation aircraft. Nebraska Furniture Mart, R.C. Willey Home Furnishings, Star Furniture and Jordan’s Furniture are retailers of home furnishings. Borsheims, Helzberg Diamond Shops and Ben Bridge Jeweler are retailers of fine jewelry.

In addition, other manufacturing, service and retail businesses include: Buffalo News, a publisher of a daily and Sunday newspaper; See’s Candies, a manufacturer and seller of boxed chocolates and other confectionery products; Scott Fetzer, a diversified manufacturer and distributor of commercial and industrial products; Albecca, a designer, manufacturer and distributor of high-quality picture framing products; CTB International, a manufacturer of equipment for the livestock and agricultural industries; International Dairy Queen, a licensor and service provider to about 5,700 stores that offer prepared dairy treats and food; The Pampered Chef, the premier direct seller of kitchen tools in the United States; Forest River, a leading manufacturer of leisure vehicles in the United States; Business Wire, the leading global distributor of corporate news, multimedia and regulatory filings; Iscar Metalworking Companies, an industry leader in the metal cutting tools business; TTI, Inc., a leading distributor of electronic components and Richline Group, a leading jewelry manufacturer.

Operating decisions for the various Berkshire businesses are made by managers of the business units. Investment decisions and all other capital allocation decisions are made for Berkshire and its subsidiaries by Warren E. Buffett, in consultation with Charles T. Munger. Mr. Buffett is Chairman and Mr. Munger is Vice Chairman of Berkshire’s Board of Directors. The Berkshire businesses collectively employ approximately 240,000 people.

 

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Merger Sub, a Delaware limited liability company, is a wholly owned subsidiary of National Indemnity Company (which, in turn, is a wholly owned subsidiary of Berkshire), and was formed solely for the purpose of facilitating the merger. Merger Sub has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will be renamed Burlington Northern Santa Fe, LLC.

The principal executive offices of both Berkshire and Merger Sub are located at 3555 Farnam Street, Omaha, Nebraska 68131, and their telephone number is (402) 346-1400.

Burlington Northern Santa Fe Corporation

BNSF, a Delaware corporation, is a holding company that conducts no operating activities and owns no significant assets other than through its interests in its subsidiaries. Through its subsidiaries, BNSF is engaged primarily in the freight rail transportation business. As of September 30, 2009, BNSF and its subsidiaries had approximately 37,000 employees. The rail operations of BNSF Railway Company (“BNSF Railway”), BNSF’s principal operating subsidiary, make up one of the largest railroad systems in North America.

BNSF Railway operates approximately 32,000 route miles of track, excluding multiple main tracks, yard tracks and sidings, approximately 23,000 miles of which are owned route miles, including easements, in 28 states and two Canadian provinces as of September 30, 2009. Approximately 9,000 route miles of BNSF Railway’s system consist of trackage rights that permit BNSF Railway to operate its trains with its crews over other railroads’ tracks.

The principal executive offices of BNSF are located at 2650 Lou Menk Drive, Fort Worth, Texas 76131 and its telephone number is (800) 795-2673.

 

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COMPARATIVE RIGHTS OF STOCKHOLDERS

General

Berkshire and BNSF are incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of each are governed by the General Corporation Law of the State of Delaware (the “DGCL”). Before the completion of the merger, the rights of BNSF stockholders are also governed by the BNSF certificate of incorporation and the BNSF bylaws. Upon completion of the merger, each share of BNSF common stock issued and outstanding immediately prior to the effective time of the merger (other than certain shares as described above under “The Merger Agreement—Merger Consideration”) will be converted into the right to receive the merger consideration, which will include shares of Berkshire Class A common stock and, in lieu of fractional shares of Class A common stock, shares of Class B common stock and cash, subject to certain adjustments. As a result, upon completion of the merger, the rights of BNSF stockholders who become Berkshire stockholders in the merger will be governed by the DGCL, the Berkshire certificate of incorporation and the Berkshire bylaws.

Certain Differences Between the Rights of Berkshire and BNSF Stockholders

The following is a summary of material differences between the current rights of Berkshire stockholders and the current rights of BNSF stockholders. While Berkshire and BNSF believe that this summary covers the material differences between the two, this summary may not contain all of the information that is important to you. This summary is not intended to be a complete discussion of the respective rights of Berkshire stockholders and BNSF stockholders, and it is qualified in its entirety by reference to the DGCL and the various documents of Berkshire and BNSF to which Berkshire and BNSF refer in this summary. In addition, the identification of some of the differences in the rights of these stockholders as material is not intended to indicate that other differences that are equally important do not exist. Berkshire and BNSF urge you to carefully read this entire proxy statement/prospectus, the relevant provisions of the DGCL and the other documents to which Berkshire and BNSF refer in this proxy statement/prospectus for a more complete understanding of the differences between the rights of a Berkshire stockholder and the rights of a BNSF stockholder. Berkshire and BNSF have filed with the SEC their respective documents referenced in this summary of stockholder rights and will send copies of these documents to you, without charge, upon your request. For further information, please see the section titled “Where To Find More Information” beginning on page 116 of this proxy statement/prospectus.

 

		Berkshire		BNSF
Authorized Capital Stock		The authorized capital stock of Berkshire consists of 1,650,000 shares of Class A common stock, 55,000,000 shares of Class B common stock and 1,000,000 shares of preferred stock. Generally, a share of Class B common stock has the rights of 1/30th of a share of Class A common stock except that it has 1/200th of the voting rights of a Class A share. If the proposed 50-for-1 stock split of the Class B common stock is approved by Berkshire stockholders, then the authorized number of shares of Class B common stock will be 3,225,000,000, and one share of Class B common stock will generally have the economic rights of 1/1,500th of a share of Class A common stock and 1/10,000th of the voting rights. Each share of Class A common stock is convertible into 30		The authorized capital stock of BNSF consists of 600,000,000 shares of common stock, 25,000,000 shares of preferred stock and 50,000,000 shares of Class A preferred stock.

 

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		Berkshire		BNSF
		shares of Class B common stock (or 1,500 shares, if the 50-for-1 stock split is approved), but the Class B common stock is not convertible into Class A common stock.
Number of Directors		Berkshire’s bylaws provide that the Berkshire board of directors shall consist of one or more members, with the exact number to be determined from time to time by the board of directors. Berkshire currently has 11 directors.		BNSF’s bylaws provide that the BNSF Board shall consist of not less than three nor more than 21 directors, with the exact number to be determined from time to time by the board of directors. BNSF currently has 11 directors.
Election of Directors		In accordance with Section 216 of the DGCL, Berkshire’s directors are elected by the affirmative vote of a plurality in voting power of the Berkshire shares entitled to vote for the election of directors at a meeting at which a quorum is present.		Under BNSF’s bylaws, each BNSF director is elected by the vote of a majority of the votes cast with respect to the director at any meeting for the election of directors at which a quorum is present; provided that if the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the votes cast.
Voting		Under Berkshire’s certificate of incorporation, each holder of Class A common stock shall be entitled to one vote for each share of Class A common stock standing in that holder’s name on the books of Berkshire. Each holder of Class B common stock shall be entitled to 1/200th of one vote for each share of Class B common stock standing in that holder’s name on the books of Berkshire. If the 50-for-1 stock split is approved by Berkshire stockholders, each share of Class B common stock shall have 1/10,000th of one vote. Except as required by Delaware law, the Class A and Class B common stock vote as a single class with respect to all matters submitted to a vote of the stockholders.		Under BNSF’s certificate of incorporation, each holder of common stock of BNSF at all times shall be entitled to one vote for each share of stock standing in that holder’s name on the books of BNSF.
Vacancies on the Board of Directors		Under Berkshire’s bylaws, vacancies on the board of directors may be filled by the vote of the stockholders at a meeting called for that purpose, or by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.		Under BNSF’s bylaws, vacancies on the BNSF Board may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, at any regular or special meeting of the BNSF Board.
Stockholder Action by Written Consent		Under Berkshire’s certificate of incorporation, any action which would otherwise be required or permitted to be taken at a meeting of stockholders may instead be taken by the written consent of		Under BNSF’s certificate of incorporation, any action by the stockholders must be taken at a meeting of the stockholders and no action may be taken by written consent.

 

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		Berkshire		BNSF
		stockholders who would be entitled to vote on that action at a meeting having at least the total number of votes required to take that action at a meeting.
Amendment to Certificate of Incorporation		Under Section 242 of the DGCL, an amendment to Berkshire’s certificate of incorporation generally requires approval of the majority of the Berkshire board of directors and the vote of the holders of shares of Class A and Class B common stock having a majority of the votes. Under the DGCL and, in the case of the Class B common stock, Berkshire’s certificate of incorporation, certain amendments that could adversely affect the rights of the holders of either the Class A or Class B common stock require a separate class vote of the holders of a majority of the Class so affected.		Under Section 242 of the DGCL, an amendment to BNSF’s certificate of incorporation generally requires approval of the majority of the BNSF Board and the vote of the holders of a majority of the outstanding BNSF common stock. In addition, BNSF’s certificate of incorporation provides that no amendment shall be made to certain provisions thereof, among other things, governing business combinations with certain interested stockholders and prohibiting stockholder action by written consent, unless such amendment receives the approval of at least 51% of BNSF’s issued and outstanding voting stock, excluding the voting stock held by certain interested stockholders.
Amendment of Bylaws		Under Section 109 of the DGCL, the power to adopt, amend or repeal bylaws is in the stockholders entitled to vote. Section 109 also provides that a corporation may, in its certificate of incorporation, give that power to the directors as well. Under Berkshire’s certificate of incorporation, Berkshire’s board of directors is authorized to make, alter, amend and repeal the bylaws of Berkshire in any manner not inconsistent with Delaware law.		Under Section 109 of the DGCL, the power to adopt, amend or repeal bylaws is in the stockholders entitled to vote. Section 109 also provides that a corporation may, in its certificate of incorporation, give that power to the directors as well. Under BNSF’s certificate of incorporation, the BNSF Board is authorized to adopt, amend or repeal the bylaws of BNSF, subject to the power of the stockholders having voting power to adopt bylaws and to amend or repeal bylaws adopted or amended by the BNSF Board.
Special Stockholder Meetings		Under Berkshire’s bylaws, a special meeting of the Berkshire stockholders may be called by the chairman of the board or by the board of directors, or by the secretary upon application of a majority of the directors or one or more stockholders who are entitled to vote and who hold at least 50% of Berkshire’s issued and outstanding capital stock.		Under BNSF’s bylaws, a special meeting of the BNSF stockholders may be called by a majority of the BNSF Board, the chairman of the BNSF Board or the president, or by the secretary at the written request of the holders of not less than 25% of all issued and outstanding shares of BNSF entitled to vote at the meeting.
Notice of Stockholder Meetings		Under Berkshire’s bylaws, written notice of each meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting.		Under BNSF’s bylaws, written notice of each meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting, and in the case of a special meeting called by stockholders, the notice shall be given by BNSF not more than 90 days following receipt by the secretary of the written request for such special meeting.

 

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		Berkshire		BNSF
Preemptive Rights		Berkshire’s certificate of incorporation does not grant any preemptive rights.		BNSF’s certificate of incorporation expressly states that no holder of common stock shall have any preemptive rights to subscribe for any securities of BNSF.
Dividends		Under Berkshire’s certificate of incorporation, holders of Class A common stock shall be entitled to receive dividends or other distributions when and as may be declared by Berkshire’s board of directors out of assets or funds that are legally available for such purpose. Holders of Class B common stock generally shall be entitled to receive dividends or other distributions equal in value to 1/30th (or 1/1,500th if the 50-for-1 stock split is approved) of the amount per share declared by Berkshire’s board of directors for each share of Class A common stock.		Under BNSF’s bylaws, the BNSF Board may declare dividends upon shares of BNSF’s capital stock out of its surplus or, if there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, whenever, and in such amounts, as in the board’s opinion, the condition of the affairs of BNSF render it advisable.
Limitation of Liability of Directors		Under Berkshire’s certificate of incorporation, no Berkshire director shall have personal liability to Berkshire or its stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by the DGCL, as it may be amended from time to time.		Under BNSF’s certificate of incorporation, no BNSF director shall have personal liability to BNSF or its stockholders for monetary damages for breach of fiduciary duties as a director to the fullest extent permitted by the DGCL, as it may be amended from time to time. If this limitation of personal liability is ever repealed or amended, it shall not adversely affect the right or protection of any director for or with respect to any acts or omissions occurring prior to such repeal or amendment.
Indemnification of Officers and Directors		Berkshire’s bylaws provide that Berkshire shall indemnify and hold harmless to the fullest extent permitted by Delaware law, as that law may be amended from time to time (but only to the extent that such an amendment permits Berkshire to provide broader indemnification rights), any director or officer who was or is a party or is threatened to be made a party to or who is involved in any proceeding by reason of the fact that he or she (or a person of whom he or she is the legal representative) is or was a director or officer of Berkshire or is or was serving in another capacity at the request of Berkshire; provided, however, except for a proceeding against Berkshire seeking to enforce or obtain payment under any right to indemnification, Berkshire shall indemnify a person seeking indemnification in connection with a proceeding (or part thereof)		BNSF’s bylaws provide that BNSF shall indemnify and hold harmless to the fullest extent authorized by the DGCL, as it may be amended from time to time (but only to the extent that such an amendment permits BNSF to provide broader indemnification rights), any person who was or is made a party or is threatened to be made a party to or is involved in any actual or threatened proceeding by reason of the fact that he or she is or was a director or officer of BNSF or is or was serving at the request of BNSF in another capacity; provided, however, except for proceedings against BNSF seeking to enforce rights to indemnification, BNSF shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the BNSF Board.

 

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		Berkshire		BNSF
		initiated by such person only if Berkshire has joined in or consented to the initiation of such proceeding (or part thereof).
Appraisal Rights		Berkshire stockholders are not entitled to appraisal rights under Section 262 of the DGCL in connection with the merger because Berkshire is not a constituent corporation in the merger.		Under Delaware law, appraisal rights are only available if, among other things, stockholders are required to accept cash for their shares (other than cash in lieu of fractional shares). Therefore, with respect to any shares of BNSF common stock for which stockholders did not elect to receive cash merger consideration, but would be required under the merger agreement to receive cash merger consideration (other than cash in lieu of fractional shares of Berkshire Class B common stock), such stockholders may have the right, if they do not vote in favor of the merger agreement, in lieu of receiving the cash merger consideration for those shares, to obtain payment in cash for the “fair value” of those shares as determined by the Delaware Chancery Court. BNSF reserves the right to take the position that appraisal may only be sought with respect to shares described in the first sentence of this paragraph, and may not be exercised with respect to any shares as to which cash was elected or stock was received.
Certain Business Combination Restrictions		Section 203 of the DGCL restricts a Delaware corporation from engaging in certain transactions with a stockholder once that stockholder has acquired a significant holding in the corporation. A corporation may elect not to be governed by Section 203 of the DGCL, but Berkshire has not made such an election. Accordingly, Berkshire is governed by Section 203.   Under Berkshire’s certificate of incorporation, any merger or consolidation of Berkshire with or into another entity, or any reclassification of securities or recapitalization of Berkshire, or any other transaction that increases, as compared to the outstanding shares of Class B stock, the proportionate number of shares outstanding or aggregate voting power of the outstanding shares of any other class of equity securities, or any class of securities convertible into any class of		Section 203 of the DGCL restricts a Delaware corporation from engaging in certain transactions with a stockholder once that stockholder has acquired a significant holding in the corporation. A corporation may elect not to be governed by Section 203 of the DGCL, but BNSF has not made such an election. Accordingly, BNSF is governed by Section 203.   Because Berkshire already owns approximately 22.6% of BNSF’s outstanding common stock, the merger is subject to the restrictions of Section 203 of the DGCL. Under Section 203, the affirmative vote of the holders of 66 2/3% of the shares of common stock not held by Berkshire or its affiliates or associates is required to approve the merger.   In addition, BNSF’s certificate of incorporation provides that if certain

 

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		Berkshire		BNSF
		equity securities, shall require the affirmative vote of the holders of a majority of the outstanding shares of Class B stock, unless, among other things, the holders of the Class B stock receive equivalent but proportionate consideration for their shares or certain other requirements are met.		affiliates of BNSF or a stockholder who owns at least 10% of BNSF’s common stock proposes a business combination, the affirmative vote of the holders of not less than 51% of BNSF’s issued and outstanding common stock, excluding the shares held by the person making the proposal, shall be required for the adoption or authorization of the business combination.   This requirement does not apply, however, if certain members of the BNSF Board determine, among other things, that the person making the proposal owns less than 80% of BNSF’s common stock and the fair market value of the consideration per share to be received by BNSF stockholders in the business combination is equal to or greater than the consideration per share paid by the proposing person in acquiring the largest number of shares of common stock in prior transactions (and so long as the proposing person did not benefit from any loans or other financial assistance from BNSF). The requisite members of the BNSF Board have found the merger proposed by Berkshire to be within this exception to the requirement, but the stockholder vote required by Section 203 of the DGCL still applies.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of Berkshire and BNSF, combined and adjusted to give effect to the merger. The unaudited pro forma condensed combined balance sheet assumes that the merger took place on September 30, 2009 and combines Berkshire’s September 30, 2009 unaudited consolidated balance sheet with BNSF’s September 30, 2009 unaudited consolidated balance sheet.

The unaudited pro forma condensed combined statements of earnings for the fiscal year ended December 31, 2008 and the nine months ended September 30, 2009 assume that the merger took place on January 1, 2008. Berkshire’s audited consolidated statement of earnings for the fiscal year ended December 31, 2008 has been combined with BNSF’s audited consolidated statement of income for the fiscal year ended December 31, 2008 and Berkshire’s unaudited consolidated statement of earnings for the nine months ended September 30, 2009 has been combined with BNSF’s unaudited consolidated statement of income for the nine months ended September 30, 2009.

The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable, and (3) with respect to the statements of earnings, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the following historical consolidated financial statements and accompanying notes of Berkshire and BNSF for the applicable periods, which are incorporated by reference in this proxy statement/prospectus:

 

•

Separate historical financial statements of Berkshire as of and for the year ended December 31, 2008 and the related notes included in Berkshire’s Annual Report on Form 10-K for the year ended December 31, 2008;

 

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Separate historical financial statements of BNSF as of and for the year ended December 31, 2008 and the related notes included in BNSF’s Annual Report on Form 10-K for the year ended December 31, 2008;

 

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Separate historical financial statements of Berkshire as of and for the three and nine months ended September 30, 2009 and the related notes included in Berkshire’s Quarterly Report on Form 10-Q for the period ended September 30, 2009; and

 

•

Separate historical financial statements of BNSF as of and for the three and nine months ended September 30, 2009 and the related notes included in BNSF’s Quarterly Report on Form 10-Q for the period ended September 30, 2009.

The unaudited pro forma condensed combined financial information is presented for informational purposes only. The unaudited pro forma information is not necessarily indicative of what the combined financial position or results of operations actually would have been had the merger been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the combined financial position or operating results for any future period.

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States, or GAAP standards. Berkshire is the acquirer for accounting purposes. Berkshire has not had sufficient time to completely evaluate the significant identifiable assets of BNSF and in particular BNSF’s unique long-lived tangible and identifiable intangible assets. Accordingly, the pro forma adjustments, including the allocations of the purchase price, are very preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these very preliminary estimates and the final acquisition accounting could be material.

 

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Berkshire Hathaway Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

September 30, 2009

 

		Berkshire			BNSF				Pro Forma Adjustments						Pro Forma Combined
		(in millions, except share amounts)
Assets:
Insurance and Other:
Cash and cash equivalents		$	23,840		$	—			$	(7,909	)		(A)		$	15,931
Investments:
Fixed maturity securities			32,586			—				—						32,586
Equity securities