Union Pacific has announced a bid to buy rival railroad Norfolk Southern in a deal worth $85 billion (£64 billion), in what could become the largest rail merger in US history. If approved, the move would create America’s first coast-to-coast freight railway by linking Union Pacific’s western network with Norfolk Southern’s routes across the East.
“This transaction is the next step in advancing the industry,” said Union Pacific CEO Jim Vena. “Railroads have been an integral part of building America since the Industrial Revolution.” Union Pacific is offering $20 billion (£15 billion) in cash and one share of its stock for each Norfolk Southern share. That puts the total value of the deal at around $320 (£240) per share.
Norfolk Southern was trading at just over $260 (£195) earlier this month before reports of a deal emerged.
According to the Associated Press, the combined company would be worth more than $200 billion (£150 billion) and could speed up deliveries of key materials such as lumber, steel, and plastics across the country.
By eliminating the need to hand off shipments between railroads in the middle of the country, the companies say goods could move more quickly and possibly at lower cost.
However, the deal is expected to face close scrutiny from regulators.
Any merger would need approval from the Surface Transportation Board (STB), which has taken a tough stance on rail consolidation in recent decades.
Past tie-ups, including Union Pacific’s merger with Southern Pacific in 1996 and the split of Conrail in 1999, caused major service disruptions and traffic backups on US railways.
As a result, there’s widespread debate over whether a major rail merger would be approved.
Still, there is recent precedent. Two years ago, the STB approved Canadian Pacific’s $31 billion (£23 billion) takeover of Kansas City Southern to create CPKC, the first major freight rail merger in more than 20 years.
That deal involved the two smallest major railroads and was seen as a way to boost trade across North America.
This latest proposal, by contrast, involves two of the biggest players in the US rail industry.
If the deal goes through, it could spark further mergers. Industry experts believe rivals like BNSF and CSX would face pressure to combine in order to compete.
Berkshire Hathaway, which owns BNSF, has more than $348 billion (£261 billion) in cash on hand, and speculation has grown over whether Warren Buffett could be eyeing one final deal before stepping down as CEO later this year.
Union Pacific and Norfolk Southern said they plan to file for approval within six months and hope to complete the deal by early 2027.
Shares in Union Pacific rose nearly 2% after the announcement, while Norfolk Southern shares dipped more than 2%.