Union Pacific to Acquire Norfolk Southern in $85 Billion Deal

Union Pacific Corporation and Norfolk Southern Corporation have announced a definitive agreement for Union Pacific to acquire Norfolk Southern in a stock and cash transaction valued at $85 billion. This merger aims to create the first transcontinental railroad in the United States, connecting over 50,000 route miles across 43 states and linking approximately 100 ports. The combined entity is projected to unlock approximately $2.75 billion in annualized synergies and deliver substantial long-term value for shareholders. The transaction is subject to regulatory approval from the U.S. Surface Transportation Board (STB), with the companies targeting closure by early 2027.

Background on the Companies Involved

Union Pacific Corporation is a leading transportation company with a network covering 23 states in the western two-thirds of the United States. It provides freight transportation services for a variety of products, including agricultural goods, automotive, chemicals, coal, industrial products, and intermodal containers.

Norfolk Southern Corporation operates approximately 19,500 route miles in 22 states and the District of Columbia, primarily in the eastern United States. It serves every major container port in the eastern U.S. and provides efficient connections to other rail carriers. Norfolk Southern is a major transporter of coal, automotive, and industrial products.

Details of the Merger Agreement

• Transaction Structure: Norfolk Southern shareholders will receive 1.0 Union Pacific common share and $88.82 in cash for each Norfolk Southern share, implying a value of $320 per share. This represents a 25% premium to Norfolk Southern’s 30-trading day volume-weighted average price as of July 16, 2025. Union Pacific will issue approximately 225 million shares, resulting in Norfolk Southern shareholders owning about 27% of the combined company.

• Financial Projections: The merger is expected to generate approximately $2.75 billion in annualized synergies, contributing to more than $30 billion in potential value creation. Based on 2024 pro-forma results, the combined company would have revenues of around $36 billion, EBITDA of approximately $18 billion, an operating ratio of 62%, and free cash flow of $7 billion. The transaction is projected to be accretive to Union Pacific's adjusted earnings per share in the second full year after closing, with high single-digit accretion thereafter.

• Leadership and Headquarters: Union Pacific CEO Jim Vena will lead the combined entity, committing to a five-year tenure. Three Norfolk Southern directors, including CEO Mark George, are expected to join the Union Pacific Board. The headquarters will remain in Omaha, Nebraska, with Atlanta, Georgia, serving as a core location for technology, operations, and innovation.

Regulatory Approval Process

The merger requires approval from the U.S. Surface Transportation Board (STB). On July 30, 2025, the STB confirmed receipt of a notice of intent regarding the proposed merger, initiating the regulatory review process. The companies plan to file their application on or before January 29, 2026. The STB will evaluate the application to determine its completeness and issue a procedural schedule for the review process.

Industry and Stakeholder Reactions

• Customer Concerns: Several U.S. railroad customer groups, including the Freight Rail Customer Alliance and the American Fuel and Petrochemical Manufacturers, have urged regulators to block or impose strict conditions on the merger. They cite concerns about reduced competition, potential price increases, and declines in service quality. These groups warn that the merger could trigger further consolidation in the industry, exacerbating existing service issues.

• Union and Employee Implications: Union Pacific and Norfolk Southern have stated that every union employee who wants a job in the combined company will have one. The companies aim to be the safest railroad in North America and deliver the service customers rely on with operational excellence.

Historical Context

This merger continues a trend of significant consolidations in the U.S. freight rail industry over the past three decades. Previous mergers, such as the formation of BNSF Railway and the Union Pacific-Southern Pacific merger, have reshaped the national rail map, aiming to improve operational efficiency and expand geographic reach. These consolidations have often faced intense regulatory scrutiny from bodies like the STB.

Potential Implications

• Economic Impact: The creation of a transcontinental railroad could transform the U.S. supply chain, potentially reducing transit times and improving efficiency. This may benefit industries reliant on rail transportation by providing more streamlined logistics and reducing highway congestion.

• Competitive Landscape: The merger may pressure other major railroads, such as BNSF and CSX, to consider similar consolidations to remain competitive. This could lead to further industry consolidation and changes in the competitive dynamics of freight transportation.

Conclusion

The proposed merger between Union Pacific and Norfolk Southern represents a significant development in the U.S. freight rail industry, with the potential to create the nation's first transcontinental railroad. While the companies anticipate substantial synergies and operational efficiencies, the transaction faces regulatory scrutiny and opposition from certain customer groups concerned about competition and service quality. The outcome of the regulatory review process will be pivotal in determining the future landscape of the American freight rail network.