Union Pacific and Norfolk Southern announced on July 29 that the two Class I railroads are merging to create the first single, transcontinental railroad in the United States. The news of the $85 billion deal followed weeks of rumors, denials, and hints that preceded the merger announcement that, if approved by federal regulators, would reshape the railroad industry for decades to come.

Put together, UP and NS would be by far the largest Class I railroad, with more than 50,000 miles of track stretching across 43 states and into every corner of the continental United States. In a news release, UP CEO Jim Vena said the merger would benefit shippers and the nation by having just one railroad that connects both coasts, something that has never happened in the nearly 200-year history of American railroading. 

“Railroads have been an integral part of building America since the Industrial Revolution, and this transaction is the next step in advancing the industry,” Vena said in a press release. “Imagine seamlessly hauling steel from Pittsburgh, Pennsylvania to Colton, California and moving tomato paste from Heron, California to Fremont, Ohio. Lumber from the Pacific Northwest, plastics from the Gulf Coast, copper from Arizona and Utah, and soda ash from Wyoming. Right now, tens of thousands of railroaders are moving almost everything we use. You name it, and at some point, the railroad hauled it.”

The new railroad will be called “Union Pacific Transcontinental.” Vena will be the CEO of the combined system. 

Under the terms of the agreement, UP will acquire NS in a stock and cash transaction that values NS at $320 per share, a 25 percent premium to NS’s 30-trading-day volume. UP and NS hope to complete the transaction by early 2027.

The new railroad will be called “Union Pacific Transcontinental.” Vena will be the CEO of the combined system. —Photo by Steve Barry. 

The slow drip of merger news started weeks before the announcement, when on July 16, online news site Semafor reported that UP had hired Morgan Stanley to explore acquiring one of the other five Class I railroads. Later that day, it was reported that UP had been in talks with NS about a possible merger since the beginning of the year. Then, on July 21, Semafor reported that BNSF Railway had enlisted Goldman Sachs for its own merger bid. Reuters later reported that CSX was its target. Initially, the railroads stayed mum on the rumors. But the day after Semafor and Reuters reported that BNSF was considering a bid for CSX, Warren Buffett of Berkshire Hathaway went on CNBC to dismiss those rumors, telling the cable network the story was false. However, while the 94-year-old billionaire wields significant influence over what BNSF does, industry observers said it seemed unlikely that the Class I railroad — UP’s chief rival in the western U.S. — would simply sit on the sidelines if UP made a serious move at NS. Unless, of course, BNSF’s owners believed UP stands no chance of acquiring NS.

BNSF has not given a statement regarding the proposed UP-NS merger. However, if it doesn’t make an offer for CSX — or even a competing offer for NS — it’s likely that the Class I railroad (currently the largest in North America) will vigorously oppose the UP-NS merger. 

Union Pacific CEO Jim Vena and Norfolk Southern President and CEO Mark George sign the agreement between the two companies. —Union Pacific

The news that UP is planning a move against another Class I railroad comes just two years after Canadian Pacific and Kansas City Southern completed what many believed would be the “final” merger. That merger between North America’s smallest Class I railroads was not subject to the stricter set of merger rules established in 2001 following the merger mania of the 1990s. However, any future mergers would need to meet those higher standards to ensure they serve the public interest. At the time of the CP-KCS deal, the U.S. Surface Transportation Board appeared cautious about further consolidation, especially with Chairman Martin J. Oberman in charge. But some think Patrick Fuchs, the 37-year-old appointed to the board in 2019 by President Donald Trump who now serves as its chair, might be more receptive to the idea of additional mergers.

—Justin Franz