Warren Buffett's Berkshire Hathaway Inc. will pay $26 billion to buy out railroad Burlington Northern Santa Fe Corp. in what the billionaire investor called a bet on the U.S. economy.

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 a sign that the Oracle of Omaha, at least, is bullish on the basic building blocks of the American economy.

Analysts say it's also a shrewd bet on a business that could add to Berkshire Hathaway's bottom line over time.

"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."

Berkshire Hathaway 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.

"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, adding it was logical for Buffett to buy the rest of the railroad. "Berkshire is seeing way past some impending economic recovery signs now and looking into the future."

The railroad carries such basic necessities for the American economy as coal, and demand for rail service will go up as the economy recovers and with it, demand for energy for such activities as manufacturing. But Buffett is well known as a long-term investor, so that demand might not be an immediate thing.

Still, Buffett's gamble comes at a time when signs are more positive for the U.S. economy. GDP numbers show the economy grew in the third quarter, and the Institute of Supply Management's measurement showed manufacturing grew for the third straight month in October.

Berkshire's board approved a 50-for-1 split of the company's Class B common stock to help ease the way for the deal.

"We'll have more people moving more goods 10, 20, 30 years from now," Buffett, Berkshire chairman and CEO, said on CNBC television. "I just believe this country will prosper."

Analysts called the planned purchase a shrewd one for the sage of Omaha, the Dallas Business Journal reports

"We think it's a logical fit," said Keith Schoonmaker, senior equity analyst at Chicago's Morningstar. "We think it's a rational price. (Buffett) is not thinking about the next quarter. He's thinking about the next decade."

According to Schoonmaker, Buffett was probably attracted to Burlington Northern's strong competitive advantage through proverbial "barriers to entry" to would-be rivals. "The challenges of acquiring new rights of way and laying thousands of miles" of track gives Burlington Northern an "economic moat" that is hard for competitors to match, Schoonmaker said.

Buffett also probably likes the predictability of Burlington Northern's business, Schoonmaker said. "Coke will stay coke, and railroads will stay railroads. It's not a business that's speculative. They're hauling freight in North America."