(The Associated Press circulated the following story by Josh Funk on January 19, 2010.)
FORT WORTH, Texas — Warren Buffett’s Berkshire Hathaway Inc. is getting ready to split the company’s Class B shares Thursday as part of its plan to buy Burlington Northern Santa Fe Corp.
The 50-for-1 stock split, which shareholders will vote on Wednesday, will boost the liquidity of Berkshire’s stock and enable Berkshire to offer even small BNSF shareholders Berkshire stock as part of its $26.3 billion cash and stock deal.
The liquidity and lower share price Berkshire will have from the split will also raise the chances that the Omaha-based company will join the S&P 500 index. Berkshire’s Class A shares, which are the nation’s most expensive stock, and its Class B shares have been difficult to trade because of their high prices.
Berkshire’s Class A sold for $97,500 Monday. Class B shares sold for $3,247.
Class B shares, dubbed “Baby Berkshires,” were first issued in 1996 to meet demand from smaller investors and to discourage investment firms from reselling pieces of Berkshire’s original shares – which became the Class A shares.
Buffett declined to discuss the stock split ahead of Wednesday’s special shareholder meeting in Omaha. Berkshire’s board has said in documents sent to shareholders that it supports the split regardless of the BNSF deal.
The split will make the $3,247 Class B shares significantly more affordable: They will be worth $64.94 apiece.
“Now everybody will have access to it,” said Andy Kilpatrick, the stockbroker-author who wrote “Of Permanent Value: The Story of Warren Buffett.”
The fact that the split may lead to inclusion in the S&P 500 is also significant because so many investors rely on it as athe primart gauge of the stock market.
For years, Buffett has measured Berkshire’s annual performance against that index in his letter to shareholders.
Being included would also generate new investment in Berkshire because trillions of dollars follow moves in the index, and mutual funds buy stock in the companies in it.
Buffett’s charitable plans are another factor that will increase the number of Class B shares available to trade in the future. Buffett has pledged to convert all his Berkshire holdings to B shares and donate them to charity over time.
The Class B split was a key part of the BNSF deal when it was announced in December. 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.
Berkshire and BNSF have said they expect the deal to close in the first quarter, and the Ft. Worth, Texas, railroad has scheduled a Feb. 11 shareholder vote on it.
Berkshire expects the majority of the shares issued in the $100-per-share deal will be Class A shares, but holders of smaller amounts of BNSF shares who opt for a share exchange rather than cash will receive Class B shares.
Berkshire already owns more than 60 subsidiaries.