Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: carranza2 who wrote (71856)	12/27/2009 3:56:03 PM
From: Haim R. Branisteanu	Read Replies (1) of 74559

After Berkshire CEO Warren Buffett made what proved to be a successful $100-a-share bid to Burlington CEO Matthew Rose, Burlington management sent the railroad's board four potential financial scenarios to consider as it weighed Buffett's proposal. The most optimistic -- that Burlington could earn $5.06 a share if the economy and the company's business recover in 2010 -- was at odds with Wall Street's far more upbeat 2010 consensus earnings estimate of $5.50 a share, according to the preliminary proxy for the merger. Management thought it more likely the economy wouldn't start to recover until 2011 and that the railroad would earn a depressed $4.40 a share in 2010. The other two scenarios were even more bearish: Either there would be no recovery and unit growth would be flat for five years, or the economy would enter a "deeper recession." These forecasts suggest Berkshire overpaid for Burlington. Wall Street thinks Buffett paid a full but not excessive price, especially as 40% of the deal price will be paid in Berkshire shares. online.barrons.com

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