5. Merger

As discussed in Note 1 to the Consolidated Financial Statements, on February 12, 2010, Burlington Northern Santa Fe Corporation was acquired by Berkshire pursuant to the Agreement and Plan of Merger, dated as of November 2, 2009 (the Merger Agreement). Immediately prior to completion of the Merger, Berkshire and its affiliates and associates owned 76,777,029 shares of Burlington Northern Santa Fe Corporation common stock, representing 22.5% of the total issued and outstanding shares of its common stock. As a result of the Merger, each share of common stock of Burlington Northern Santa Fe Corporation, par value $0.01 per share, other than shares owned by Berkshire, Burlington Northern Santa Fe Corporation or any of their respective subsidiaries, was converted into the right to receive, at the election of the stockholder (subject to the proration and reallocation procedures described in the Merger Agreement), either (i) $100.00 in cash, without interest, or (ii) a portion of a share of Berkshire Class A common stock equal to the exchange ratio, which was calculated by dividing $100.00 by the average of the daily volume–weighted average trading prices per share of Berkshire Class A common stock over the ten trading day period ending on the second full trading day prior to completion of the Merger. Fractional shares of Berkshire Class A common stock were not issued in the Merger. Instead, shares of Berkshire Class B common stock were issued in lieu of fractional shares of Berkshire Class A common stock, and cash was paid in lieu of fractional shares of Berkshire Class B common stock. Approximately 60% of the total merger consideration paid by Berkshire to stockholders of Burlington Northern Santa Fe Corporation was in the form of cash and approximately 40% was in the form of Berkshire common stock.

Between January 1 and February 12, 2010 (Predecessor), the Company incurred approximately $62 million in costs related to the Merger, which were primarily recorded in purchased services in the Consolidated Statements of Income.

The Merger was accounted for using the acquisition method under Accounting Standards Codification (ASC) Topic 805, Business Combinations. Under the acquisition method, the underlying tangible and intangible assets acquired and liabilities assumed were recorded at their respective fair values, with the excess purchase price recorded to goodwill. None of the goodwill recorded in connection with the Merger was deductible for income tax purposes. The acquisition valuation was completed at December 31, 2010, and is summarized in the following tables (in millions):



Cash paid as merger consideration	$	15,874
Value of Berkshire common stock issued as merger consideration	10,577
Total merger consideration to acquire the remaining shares of Predecessor	26,451
Value of Predecessor already owned by Berkshire valued at merger price of $100.00 per share	7,678
Value of Berkshire equity awards to replace pre-existing Predecessor equity awards	366
Total purchase price recorded	$	34,495



Assets			Liabilities and net assets acquired
Cash and cash equivalents	$	971	Accounts payable and other current liabilities	$	2,261
Accounts receivable	808		Long-term debt due within one year	649
Materials and supplies	630		Long-term debt	10,493
Current portion of deferred income taxes	210		Deferred income taxes	13,413
Other current assets	144		Intangible liabilities	2,056
Property and equipment	43,987		Casualty and environmental liabilities	928
Goodwill	14,803		Pension and retiree health and welfare liability	865
Intangible assets	2,025		Other liabilities	513
Other assets	2,095		Net assets acquired	34,495
Total assets	$	65,673	Total liabilities and net assets acquired	$	65,673

The fair value of assets acquired included accounts receivable of $808 million, consisting of the gross amount due under contracts of $862 million, less $54 million estimated to be uncollectible.

The fair value of assets acquired also included intangible assets of $2,025 million, with a weighted average amortization life of 10 years. The fair value of liabilities acquired included intangible liabilities of $2,056 million, with a weighted average amortization life of 16 years. See Note 10 to the Consolidated Financial Statements for further information related to intangible assets and liabilities.

Liabilities acquired included contingencies related to casualty and environmental liabilities in the amount of $1,178 million. Casualty liabilities were measured at fair value, and environmental liabilities were measured in accordance with ASC Topic 450, Contingencies. See Note 14 to the Consolidated Financial Statements for further information related to casualty and environmental liabilities.

The following unaudited pro forma financial data summarizes BNSF’s results of operations as if the Merger had occurred as of January 1, 2009 (in millions):



	Year Ended December 31,
	2010
Revenues	$	16,883
Net income	$	2,549

The pro forma amounts represent BNSF’s results of operations with appropriate adjustments, which are expected to have a continuing impact, resulting from the application of acquisition method accounting. The unaudited pro forma financial data is provided for informational purposes only and is not necessarily indicative of what BNSF’s results of operations would have been if the Merger had occurred as of January 1, 2009, or the results of operations for any future periods.