Union Pacific to buy Norfolk Southern for $85bn
The Omaha, Nebraska-based railroad giant announced the proposed $85bn deal on Tuesday.
If the merger is approved, the transaction would be the largest-ever buyout in the railroad sector.
Union Pacific has a stronghold in the western two-thirds of the US, with Norfolk's 31,382 km (19,500-mile) network that primarily spans 22 eastern states.
The two railroads are expected to have a combined enterprise value of $250bn and would unlock about $2.75bn in annualised synergies, the companies said.
The $320 per share price implies a premium of 18.6 percent for Norfolk from its close on July 17, when reports of the merger first emerged.
The companies said last week on Thursday that they were in advanced discussions for a possible merger.
The deal will face lengthy regulatory scrutiny amid union concerns about potential rate increases, service disruptions and job losses. The 1996 merger of Union Pacific and Southern Pacific had temporarily led to severe congestion and delays across the Southwest.
The deal reflects a shift in antitrust enforcement under US President Donald Trump's administration. Executive orders aimed at removing barriers to consolidation have opened the door to mergers that were previously considered unlikely.
Surface Transportation Board Chairman Patrick Fuchs, appointed in January, has advocated for faster preliminary reviews and a more flexible approach to merger conditions.
Even under an expedited process, the review could take from 19 to 22 months, according to a person involved in the discussions.
Major railroad unions have long opposed consolidation, arguing that such mergers threaten jobs and risk disrupting rail service.
'We will weigh in with the STB [regulator] and with the Trump administration in every way possible,' said Jeremy Ferguson, president of the SMART-TD union's transport division, after the two companies said they were in advanced talks last week.
'This merger is not good for labour, the rail shipper/customer or the public at large,' he said.
The companies said they expect to file their application with the STB within six months.
The SMART-TD union's transport division is North America's largest railroad operating union with more than 1,800 railroad yardmasters.
The North American rail industry has been grappling with volatile freight volumes, rising labour and fuel costs and growing pressure from shippers over service reliability, factors that could further complicate the merger.
Industry consolidation
The proposed deal has also prompted competitors BNSF, owned by Berkshire Hathaway, and CSX, to explore merger options, people familiar with the matter said.
Agents at the STB are already conducting preparatory work, anticipating they could soon receive not just one, but two megamerger proposals, a person close to the discussions told Reuters on Thursday.
If both mergers are approved, the number of Class I railroads in North America would shrink to four from six, consolidating major freight routes and boosting pricing power for the industry.
The last major deal in the industry was the $31bn merger of Canadian Pacific and Kansas City Southern that created the first and only single-line rail network connecting Canada, the US and Mexico.
That deal, finalised in 2023, faced heavy regulatory resistance over fears it would curb competition, cut jobs and disrupt service, but was ultimately approved.
Union Pacific is valued at nearly $136bn, while Norfolk Southern has a market capitalisation of about $65bn, according to data from LSEG.
As of 12:15pm in New York (16:15 GMT), Union Pacific's stock is down 3.9 percent, and Norfolk Southern is down 3.2 percent. Competitor CSX is also trending down. The stock has fallen 1.6 percent since the market opened this morning.
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