M&A News: Norfolk Southern Stock (NSC) Derails after $85B Union Pacific Takeover
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Coast to Coast
Union Pacific, whose share price also slipped 0.5%, said it would buy smaller rival Norfolk Southern in an $85 billion deal. If approved, the deal would be the largest-ever buyout in the sector and combine Union Pacific's stronghold in the western two-thirds of the U.S. with Norfolk's 19,500-mile network that primarily spans 22 eastern states.
Norfolk Southern was down 2.7% in pre-market trading, despite the all-stock deal promising to create the largest railroad operator in the country with over 50,000 miles of track, across 43 states.
Indeed, it would be the first operator to move goods from the Pacific Coast on the West to the Atlantic on the East using its own tracks. Union Pacific said this would finally meet former U.S. President Abraham Lincoln's vision of a transcontinental railroad first set out 165 years ago.
The deal values Norfolk Southern at $320 per share, giving it a value of $85 billion. Union Pacific is valued at around $165 billion. Despite being smaller, Norfolk has outperformed peers this year.
Regulatory Barriers
The railroad sector has been hit in recent times by high labor costs, fuel prices and weaker freight volumes. Although an uptick in U.S. manufacturing as a result of President Trump's tariff policies and calls for more domestic investment could spark a revival.
Indeed, the macro picture is a key risk in the business model of railroad operators.
'Railroads have been an integral part of building America since the Industrial Revolution, and this is the next step in advancing the industry,' said Jim Vena, Union Pacific's chief executive.
Mark George, chief executive of Norfolk Southern, said the deal would help ignite rail's ability to 'deliver for the whole economy.'
Given the size of the deal, it is likely that there may be some regulatory barriers dead ahead. The last major transaction in the sector – Canadian Pacific's (CP) $31 billion takeover of Kansas City Southern – took 2 years to gain approval.
If it did get the green light the deal would be the biggest since Microsoft's (MSFT) $75.4 billion takeover of Activision Blizzard back in 2023.
Is NSC a Good Stock to Buy Now?
NSC stock's consensus price target is $288.67, implying a 0.79% upside.
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- Yahoo
While shippers cite merger concerns, rival railroad looks instead to ‘collaborations'
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Hub Group is fully behind a potential UP-NS transcontinental railroad creation
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