Public interest in Berkshire Hathaway Inc. (BRK.A )(BRK.B ) shares is building up as February 11 is approaching. On that day, Burlington Northern Santa Fe shareholders (NYSE:BNI ) will decide on the railroad’s planned $26 billion acquisition by Berkshire Hathaway. There are quite a few reasons why public is interested ranging from recent stock split, S&P index inclusion, and debt offering.

Berkshire Hathaway Inc has two classes of common stock designated Class A and Class B. Yesterday, class A shares closed trading at $108,900 and analyst’s expect the stock to trade at $125,000 by the end of 2010. This stock is well out of reach for common people like you and me.

Yesterday Class B stock closed trading at $72.61. This stock has seen a rise of more than 23% in the last one year. Yet it trades at a low PE of 1.1. Not more than 23 stocks trade at that PE currently on the American, European and Japanese bourses.

Berkshire lists the differences between Class A and Class B shares as given below. A share of Class B common stock has the rights of 1/30th of a share of Class A common stock except that a Class B share has 1/200th of the voting rights of a Class A share (rather than 1/30th of the vote). Each share of a Class A common stock is convertible at any time, at the holder’s option, into 30 shares of Class B common stock. This conversion privilege does not extend in the opposite direction. That is, holders of Class B shares are not able to convert them into Class A shares.

The extent to which Class A share price can rise will limit the Class B share price appreciation. The Class B can never sell for anything more than a tiny fraction above 1/30th of the price of A. When it rises above 1/30th, arbitrage takes place in which someone ¾ perhaps the NYSE specialist ¾ buys the A and converts it into B. This pushes the prices back into a 1:30 ratio. So, if any one wants to play on either Class A or Class B share then he/she has to play in such a way that the arbitrage between these two classes of shares doesn’t exist. Now why will some like to play on these stocks?

Last month, the company split Class B share in 1:50. That split is designed to facilitate the BNI deal. At that time S&P announced that Berkshire will replace Burlington Northern Santa Fe in both the S&P 500 and the more exclusive S&P 100. This news spurred 8% surge in Class B share price. As you would expect, Class A share price was also up 5%.

Some of the market watchers were expecting Berkshire to issue more Class B shares to vet the demand related to S&P index inclusion. However, Berkshire does not intend to issue any additional shares of its common stock other than the common stock it will issue upon the completion of the previously announced acquisition of BNSF. So, S&P will have to purchase the stock from the market to maintain its index. This is likely to push the Class B share price up.

Berkshire Hathaway Inc. is likely to come out with $8 billion debt offering to digest BNI acquisition. Since the debt offering is huge, it is being offered in multiple maturities, which is not unusual.  There is a 1-year floating rate note and a fixed and/or floating rate notes for maturity in 2-years and 3-years.  There is also a 5-Year fixed rate note due in 2015 that will be coming. All of the proceeds are earmarked for paying the BNI holders in this mega-merger, although there is a clause that if the acquisition conditions are not met then the cash raised will be for general corporate purposes. Though, the debt offering is huge, the company will not find it difficult to raise the debt as the demand for debt offering from AA rated company that too run by a legend Warren Buffet is huge.

Of course, recently S&P down graded Berkshire from AAA to AA. Yet, the company’s fundamentals are so strong that the company’s debt offering is rated higher than the debt issued by several nations. The company is likely to reap huge benefits from its core business i.e. insurance in the coming reporting periods. If everything goes well with BNI acquisition, then the company’s prospects in the long run is attractive to say the least. So, go buy NYSE: BRK.B – if you are lucky enough to lay your hands on.