Warren Buffett buying Burlington Northern

The deal, Buffett's biggest-ever acquisition, is priced at a premium of 31.5 percent over BNSF's closing stock price on Monday and values the railroad at $34 billion.

"It's an all-in wager on the economic future of the United States," Buffett said in a statement, adding that railroads are key to the U.S. economy and will benefit as recovery takes hold. "I love these bets."

To help ease the way for the deal, Berkshire's board approved a 50-for-1 split of the company's Class B common stock, its first split ever under Buffett.

Berkshire will pay $100 per share in cash and stock for the 77.4 percent of BNSF shares it does not already own. Berkshire will also assume $10 billion of BNSF debt. The deal is expected to close in the first quarter of 2010.

The deal comes as the U.S. economy is beginning to recover from its worst downturn since World War II. U.S. gross domestic product grew at a 3.5 percent annual rate in the third quarter, the first quarterly growth in more than a year.

BNSF, which operates in the U.S. West and Midwest, said in September it was seeing an uptick in freight volume and was encouraged by an improvement in consumer-related markets.

U.S. railroads in recent years have invested in new technology and improved the efficiency of operations, while arguing their method of transport is cheaper and cleaner than shipping goods by truck.

Observers questioned whether Buffett will have to sell his holdings in other railroads to win regulatory approval for the BNSF deal. Berkshire had a 1.9 percent stake in Union Pacific Corp , or 9.56 million shares, as of June 30, and a 0.5 percent stake in Norfolk Southern Corp , or 1.93 million shares, according to Thomson Reuters data.

"For the market, it can be seen as a sign of confidence (about the economy)," said Peter Boockvar, equity strategist at Miller Tabak + Co in New York. "Berkshire is seeing way past some impending economic recovery signs now and looking into the future," he said.