The name which comes on top of the list when we talk about investments is surely Warren Buffet, Chief Executive Officer, Berkshire Hathaway Inc. (Public, NYSE:BRK.A). Warren Buffett’s firm said today that it will buy railroad operator Burlington Northern Santa Fe for $44 billion.
The company, Berkshire Hathway already has 22.6% stake in Burlington Northern and it would acquire the remaining 77.4% in a cash and stock offer for $100 per share. Buffett called his firm’s investment an “all-in wager on the economic future of the United States.”
“Our country’s future prosperity depends on its having an efficient and well-maintained rail system,” Buffett said in a statement. After the news came, Burlington Northern shares rose 28% in the early hours of trading.
The deal is said to be largest in Berkshire Hathway’s acquisition history and it would also include Burlington Northern’s $10 billion debt. During the conference call with investors on Tuesday, Chairman and CEO of Burlington Northern- Mathew Rose said that the sale of the Fort Worth, Texas based firm was a “strategic fit” for both the company’s employees and customers. Rose also assured that there would be no management shakeup at Burlington Northern as a result of the deal, which will close sometime in early 2010.
CIT Group which is one of the leading US funders for medium sized and small ventures filed for the bankruptcy on Sunday which is 5th largest by assets in America’s history. They have planned a reorganization that has the support of its major debtholders.
The group has asked the US Bankruptcy Court for the Southern District of New York for a quick approval for its plan. They said that its subsidiaries will continue its operations and would not be affected by the filing.
Jeffrey M Peek, Chairman of the group said, “The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy”.
The assets shown in the bankruptcy filing are $71 billion and $64.9 billion in liabilities. The other 4 companies which had more assets when they filed for protection are Lehman Brothers, Washington Mutual, Worldcom and General Motors.
Separately, the company said in a filing with the Securities and Exchange Commission on Friday that it had struck an agreement with Goldman Sachs to change the terms of a loan it had originally sought from the Wall Street firm in June.
In reducing the size of the loan to $2.125 billion from $3 billion, CIT Group will pay Goldman a termination fee of $285 million and will post $250 million in collateral.
In return, Goldman agreed not to terminate the credit facility in the event of a CIT bankruptcy. Prior to Friday’s announcement, Goldman Sachs was poised to collect $1 billion when CIT filed for bankruptcy, according to reports.
Insider trading scandals hurt the best of employees and companies. This time its IBM.Robert Moffat, IBM’s head of supply chain was arrested few weeks ago in the wake of the massive Galleon scandal, bringing not only his career on the wire but also creating a vacuum in the supply chain, hardware, server & semiconductor business of IBM.
IBM officially lost one of its favoured employees on Friday in what can be termed as a straight result of his arrest.This can be seen as just a completion of the formal seperation obligations as he was placed on leave by IBM after his arrest on Oct 16th. Whether its a v oluntary defection or a forced one, nobody knows but his lawyer’s trying his best to not give this a “termination” tag.
More details of the government’s case continue to come out. Last week, for example, government prosecutors released information from an informant and wire taps that allege Moffat gave inside information about the quarterly earnings of Sun Microsystems to Rajaratnam through an intermediary that allowed the Galleon find to make a $900,000 profit on Sun’s stock. At the time, IBM was doing due diligence with Sun for a then-pending move to buy the company (a deal which later collapsed).
A year after the massive bailout initiated by the American goverment to save wall street’s banks comes the pay cut scandal. On Oct 22 the Obama administration announced that its “payback” time for a small group of Wall Street executives. The pay of 25 top-level executives each at 7 banks which received the maximum amount of the bailout will be cut by arount 50 percent.
The administration had a lot to say, and they needed to as its a bit hard to digest - “the goverment capitalising on the capitalists”, isn’t it so? Some said that “the executive bonuses have been cut in order to keep the companies “viable.” & some were of the opinion that “the principal reason for the cuts is not to punish capitalists, but to rescue and save the bailed-out capitalist giants from their own CEOs on behalf of the stock holders.”
The seven co’s affected are Citigroup, Bank of America, AIG, General Motors, Chrysler, GMAC and Chrysler Financial.Citigroup CEO Vikram Pandit made $10.82 million in 2008, while the company received $45 billion from the government. Bank Of America’s CEO Kenneth Lewis is stepping down at the end of 2009 amid BAC’s horrid run in the last two quarters. Lewis has made headlines by proclaiming he will not take a salary for 2009, yet he will still walk away from Bank of America, which received $45 billion in bailout funds, with a retirement package worth $125 million. There were rumours that Goldman Sachs & JP Morgan had cleared out their account with the administration, but it is entirely unclear, however they have escaped this one.
Its not an argument entirely against the administration, what needs to be seen here is that yes capitalists need to make profits but not at the expense of workers.The administration is just trying to redirect workers’ very correctly placed anger at those who run the capitalist system. Obama made it very clear right from his first day that without disturbing the economic model of the country, he will make sure that supernormal or abnormal profits(including extraordinary pay packages for CEOs) do not become a case in every other Wall Street company.
The name which comes on top of the list when we talk about investments is surely Warren Buffet, Chief Executive Officer, Berkshire Hathaway Inc. (Public, NYSE:BRK.A). Warren Buffett’s firm said today that it will buy railroad operator Burlington Northern Santa Fe for $44 billion.