Railroad consolidation push: Union Pacific proposes $85bn merger with Norfolk Southern to create first US transcontinental network; STB nod seen as key hurdle
Union Pacific on Tuesday announced an $85 billion proposal to acquire Norfolk Southern, a move that would create the first coast-to-coast freight railroad in the US and could potentially trigger a final wave of consolidation in the rail industry.
The merger would link Union Pacific's vast network across the western US with Norfolk Southern's operations in 22 eastern states and the District of Columbia. While the US has been connected by rail since 1869, no single company has ever operated a unified transcontinental route, AP reported.
Union Pacific said the deal would streamline logistics by removing delays that occur when goods are handed off between carriers, enhancing delivery speed and reliability.
'It builds upon President Abraham Lincoln's vision of a transcontinental railroad from nearly 165 years ago, and will usher in a new era of American innovation,' said Union Pacific CEO Jim Vena.
Under the proposal, Norfolk Southern shareholders would receive $88.82 in cash and one Union Pacific share for each share held — valuing NS at about $320 a share. Norfolk Southern's stock closed at just over $260 earlier this month before reports of a potential deal emerged.
Following the announcement, Union Pacific shares slipped nearly 2% to $224.98 in premarket trade, while Norfolk Southern fell over 3% to $277.40.
Regulatory approval from the US Surface Transportation Board (STB) will be critical. The STB, currently split 2-2 between Republicans and Democrats, has been cautious in recent years, with the fallout from past mergers—such as Union Pacific's 1996 tie-up with Southern Pacific—prompting stricter oversight.
President Trump is expected to appoint a fifth member before the deal is reviewed.
If approved, the deal could intensify pressure on rivals BNSF and CSX to pursue their own consolidation. Analysts say the move could reshape US freight logistics, particularly if Canadian players like CN or CPKC enter the fray. The Canadian rails already have cross-border networks feeding into US trade flows, with CPKC extending into Mexico.
Some shippers, including chemical firms in the Gulf, may oppose the deal over monopoly concerns. Others, like Amazon and UPS, may back it if it improves delivery timelines and reliability. The STB will consider inputs from unions, customers, and local communities before issuing a verdict.
Union Pacific said the combined entity could generate $1.75 billion in new annual revenue and eliminate $1 billion in costs. It also assured that no union jobs would be lost.
Norfolk Southern CEO Mark George said the companies would spend the next two years preparing integration plans. 'We're committed to making sure [congestion] doesn't happen in this case,' he said, referring to past disruptions caused by major rail mergers.
The last major US rail deal was approved two years ago, when Canadian Pacific acquired Kansas City Southern to form CPKC. That $31 billion merger created a network spanning Canada, the US, and Mexico.
On Tuesday, Norfolk Southern posted a Q2 profit of $768 million, or $3.41 per share, up from $737 million a year ago. Adjusted EPS stood at $3.29, narrowly missing analyst expectations of $3.31. Volumes rose 3% year-on-year, but the quarter included one-time costs linked to the 2023 East Palestine derailment and internal restructuring.
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