Union Pacific and Norfolk Southern Shareholders Back $85 Billion Rail Merger
WASHINGTON (AP) – Shareholders of Union Pacific and Norfolk Southern are supporting a proposed merger valued at approximately $85 billion, a deal that would create the largest railroad in the United states. The combined network would span more than 50,000 miles of track across 43 states, connecting major ports on both the East and West coasts.
Under the terms of the agreement, Norfolk Southern shareholders would receive one share of Union Pacific stock and $88.82 in cash for each share they currently hold, valuing NS at roughly $320 per share. Union Pacific is offering $20 billion in cash and one share of its stock to complete the deal. Norfolk Southern shares closed at just over $260 earlier this month before reports of the potential merger surfaced. The deal includes a $2.5 billion breakup fee.
Railroad officials argue the merger will streamline the delivery of raw materials and goods nationwide by eliminating handoffs between rail lines, reducing delays.
However, the proposed merger faces scrutiny from regulators at the Surface Transportation Board (STB). The STB will carefully review the deal, holding it to a “very high bar” established after previous railroad consolidations led to significant logistical problems.
Concerns about potential negative impacts have also been voiced by a bipartisan group of lawmakers. Nine Republican attorneys general sent a letter to the STB Friday, expressing fears that higher shipping costs resulting from the merger could “kneecap American companies’ ability to compete with foreign manufacturers.” Eighteen U.S. senators, in a bipartisan effort, made a similar request to the board earlier this month.
The attorneys general wrote, “We write to express our concerns that the proposed merger between Union Pacific and Norfolk Southern will result in undue market concentration that stifles competition and therefore creates higher prices, lower reliability, and less innovation at the expense of America’s manufacturers and, ultimately, America’s consumers.”
The potential merger is also prompting strategic moves from other major railroads. CSX has hired a new CEO with a mergers and acquisitions background, leading to speculation the company may seek its own merger partner to remain competitive. Though, BNSF, CPKC, and Canadian National have indicated a preference for cooperative agreements over further consolidation.
Union Pacific’s Vena and Norfolk Southern CEO Mark George have both expressed optimism about the deal’s approval under the current governance. Though, questions have been raised about the STB’s independence, as President Trump previously fired the only board member who opposed Canadian Pacific’s acquisition of Kansas City Southern railroad. The fired board member, Robert Primus, has since filed a lawsuit challenging his removal.
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