S&P: Buffettt’s Berkshire Hathaway to replace BNSF in stock indexes after buying the railroad

Berkshire will replace BNSF in S&P stock indexes

OMAHA, Neb. — Warren Buffett’s Berkshire Hathaway Inc. will soon join the S&P 500 and S&P 100 stock indexes after it acquires Burlington Northern Santa Fe Corp., Standard & Poor’s said Tuesday.

Buffett’s company will replace BNSF in both indexes after shareholders approve Berkshire’s acquisition of the railroad company next month.

Berkshire shareholders agreed to split the company’s Class B stock 50-for-1 last week, and that move gave Buffett’s company enough liquidity to meet S&P’s criteria.

Standard & Poor’s spokesman David Guarino said Berkshire, based in Omaha, Neb., is a good fit in the indexes because the company represents the U.S. economy and stock market well.

Berkshire shares jumped 8.2 percent to $73.61 in after-hours trading Tuesday.

Buffett, who is Berkshire’s chairman and CEO, wasn’t immediately available to comment Tuesday afternoon, but he discussed the prospect of Berkshire joining the S&P 500 during last week’s special shareholder meeting on the stock split.

Buffett said he expects Berkshire will benefit from joining the S&P indexes, saying it will suddenly have buyers for about 6 percent of its shares because many investment funds buy stock in the companies in the S&P indexes to mirror the moves of the indexes. And those mutual fund buyers would plan to hold the stock long-term, which is what Buffett wants.

“Over time, if it’s in the S&P, I think it’s a slight plus for shareholders,” Buffett said last week.

The Class B split that took effect last Thursday is a key part of Berkshire’s $26.3 billion acquisition of BNSF, which is based in Ft. Worth, Texas. Berkshire agreed to pay $100 per share in cash and stock for the 77.4 percent of BNSF shares that it didn’t already own. The purchase will be the largest ever for Buffett’s company.

BNSF shareholders are scheduled to vote on the deal on Feb. 11.

The split also made Berkshire shares considerably more affordable for individual investors because the B shares were trading for about $3,500 apiece beforehand.

Berkshire’s Class A shares, which were not split, remain the most expensive U.S. stock, selling for $110,000 Tuesday after also jumping 8 percent in after-hours trading.

Berkshire owns more than 60 subsidiaries, including clothing, furniture, jewelry and corporate jet firms, but its insurance and utility businesses typically account for more than half of the company’s revenue. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

On the Net:

Berkshire Hathaway Inc.: www.berkshirehathaway.com

Standard & Poor’s: www.standardandpoors.com

Burlington Northern Santa Fe Corp.: www.bnsf.com