Railroad Operator Union Pacific Exploring Deal for Norfolk Southern
Companies are holding preliminary deal talks
Railroad operator Union Pacific UNP -1.60%decrease; red down pointing triangle is holding talks to acquire its smaller rival Norfolk Southern NSC 3.65%increase; green up pointing triangle in a deal that could create the largest rail operator in the country, according to people familiar with the matter.
The talks are early stage and there are no guarantees they will result in any deal or receive regulatory signoff, the people said. It is also possible another suitor could emerge.
Union Pacific has a market value of around $140 billion, while Norfolk is valued at about $60 billion.
Shares of Norfolk jumped 3% in after-hours trading following The Wall Street Journal report, while Union Pacific shares fell around 2%.
The deal would create a sprawling rail network that spans the continent and handles a sizable share of freight across the U.S. Currently, no railroad operator has a network that runs coast to coast in the U.S.
Union Pacific Chief Executive Officer Jim Vena has spoken publicly in recent months about the benefits of a transcontinental railroad. Vena has said that a transcontinental railroad would improve service as it would smooth out current delays at interchanges, when a railroad operator transfers railcars to another operator.
Still, any deal would face serious scrutiny from a series of regulators including the Surface Transportation Board, the economic regulator primarily overseeing freight railroads, as well as the Justice Department, investors, Amtrak and labor unions.
Analysts have speculated that Union Pacific is likely entertaining a merger proposal in part because of a more favorable regulatory environment under President Trump.
The current chairman of the STB, Patrick Fuchs, who took over the chairmanship in January, has said that he plans to speed up the rulings on disputes and other legal decisions. Fuchs said earlier this year that several long-running proceedings have already been expedited.
Norfolk is seen as a vulnerable target today.
Late last year, Norfolk’s Chief Executive Alan Shaw departed the company after a board investigation into an alleged relationship he had with an employee. That came after the company fended off activist investor Ancora Holdings, which had criticized the railroad’s response to its 2023 Ohio derailment and its sluggish financial performance.
Union Pacific, based in Omaha, Neb., is one of the two major railroads operating west of the Mississippi.
The freight railroad had been in the crosshairs of the STB for service and labor issues. Under former chairman Martin Oberman, the regulator has held public hearings and criticized Union Pacific over embargoes.
The last time federal regulators approved a major railroad merger was in 2023. Canadian Pacific Railway and Kansas City Southern sought to merge in a deal to create the first freight rail network linking Canada, the U.S. and Mexico.
Some federal agencies, communities, rail customers and other railroads, including Union Pacific, had pushed back against the merger since it was announced in 2021. They had concerns about reduced competition, higher shipping rates and the possibility of worse rail service.
A deal between Union Pacific and Norfolk, if completed, could also mark the largest corporate transaction this year, in what has been an underwhelming dealmaking environment through the first half of the year.