Warren Buffett didn't just buy a railroad when he announced his purchase of Burlington Northern Santa Fe last week. He hired the engineer, too.

"It's a bet not only on the company but on talent," said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas, which owns 150,000 Burlington Northern shares. "I can't imagine anything changing. That's Buffett's style. He's always bet on management and let those guys run it."

CEO Matthew Rose has led Burlington Northern to the top of the US industry in sales. Revenue almost doubled through 2008 from 2001, his first full year at the helm.

That growth outpaced the 50% rise at Union Pacific Corporation, his biggest competitor. Becoming a part of Buffett's Berkshire Hathaway Inc, with its AAA credit rating from Standard & Poor's, may make Rose's job easier by lowering his company's borrowing costs.

Berkshire has been building its stake since 2006, giving Buffett a glimpse of Rose (50), a 16-year employee who has been CEO since December 2000. In a statement, the Berkshire chairman and chief executive said the deal was an investment in the railroad, "Matt Rose and his team."

Berkshire's largest purchase will cost the company $26bn, or $100 a share in cash and stock, for the 77.4% of the railroad it doesn't already own. Including the previous investment and debt assumption, the deal is valued at $44bn, Omaha, Nebraska-based Berkshire said.

What may have attracted Buffett to Burlington Northern is the company's reduction of expenses as it expanded capacity, said Anthony Hatch, an independent railroad analyst.

"One of the ways they've improved is taking a high percentage of their variable costs down", including the usage of longer and fewer trains, which has increased average velocity across its system, Hatch said.

Hatch also cited Burlington Northern's development of its intermodal business, beginning in 1989 under Rose's predecessor Robert Krebs.

Intermodal refers to containers that move by a combination of rail, road and sea. Krebs, now a director of General Motors, set up a partnership with Lowell, Arkansas- based JB Hunt Transport Services Inc, now the third-largest US trucking company.

Since taking over as CEO, Rose has continued the strategy, Hatch said.

"In my nine years we've probably laid out $25bn worth of capital for our railroad," said Rose, who earned $15.6m in total compensation last year, according to a Securities and Exchange Commission filing.

Those investments include new locomotives and the addition of tracks alongside existing ones, he said. Operating parallel tracks boosts train speeds. On the single-track lines that are the most prevalent in the industry, a train heading in one direction must pull off on a siding to let oncoming traffic pass.

During a quarterly earnings call on 22 October, chief financial officer Thomas Hund said spending on tracks, equipment and other improvements would remain at $2.6bn for 2009. Being owned by Berkshire probably won't change those plans, said Jason Seidl, analyst at Dahlman Rose & Co.

"If he was buying a railroad that was small and capital-constrained, there would be a big change if you're with Berkshire," Seidl said of Buffett's deal. "But Burlington generates an enormous amount of free cash flow."

The railroad will probably have lower borrowing costs as a unit of Berkshire, even if Standard & Poor's strips Buffett's company of its AAA rating, said B Craig Hutson, a railroad debt analyst at Gimme Credit. Standard & Poor's said last week Berkshire's rating may be cut to as low as AA because of the acquisition. That's still six levels higher than Burlington Northern's BBB.

"It would be safe to assume that Burlington will have a broader access to capital and a lower cost of capital than they would have had on a stand-alone basis," Hutson said. "They haven't really held back per se on spending on growth opportunities recently. It gives them the ability to invest for the long-term without being asked every quarter how those investments in their infrastructure are doing."

Burlington Northern has $10bn of long-term debt and paid $462m in interest expense this year through 30 September according to its most recent 10-Q regulatory filing.

Rose said Buffett has been a "hands-off" shareholder who phones "fairly infrequently." The two met before Berkshire began buying Burlington Northern shares, Rose said.

"We have a large operation in Omaha, so I had a chance to meet him through some charity events," Rose said. "It's been very friendly, and he's always told me he wouldn't do anything hostile that we weren't aware of. The biggest change is that instead of having quarterly analyst meetings, I'll go to Omaha every once in a while. Warren told me one requirement is I have to go to his annual meeting."

Buffett, 79, while not immersed in industry intricacies, understands that railroads stand to benefit from rising diesel fuel prices because they can transport goods more efficiently than trucks, Rose said.

"I wouldn't call him a detail guy on the railroads," Rose said. "But he clearly understands the US economy very well."

Burlington Northern fell 12c to $96.98 in New York Stock Exchange composite trading. The stock climbed 28% this year and has jumped almost fourfold since December 2000, when Rose was promoted to CEO.

Berkshire's Class A shares increased $370 to $101,900. (Bloomberg)