Union Pacific nears Norfolk deal to create $200 billion railroad
Union Pacific Corp., North America’s largest railroad, is in advanced discussions with Norfolk Southern Corp. about a potential tie-up in what would be the industry’s largest deal ever.
Union Pacific has a market value of about $135 billion, more than twice the size of Norfolk Southern’s $64 billion. Combining the two would transform the North American rail market, marrying Union Pacific’s network across the western U.S. with Norfolk’s East Coast routes.
It would also require regulatory approval, and heap competitive pressure on rivals including CSX Corp. and Berkshire Hathaway Inc.’s BNSF.
Union Pacific shares fell 4.54% at close Thursday in New York, and Norfolk Southern’s sank 0.8%.
A statement confirming the talks was released as Union Pacific’s second-quarter earnings call was underway.
“We’ve done a lot of homework to get us to this place,” Union Pacific Chief Executive Officer Jim Vena said Thursday on the earnings call. He declined to comment further on the merger, saying “only a fool” would expect that in the middle of discussions.
Historically rail mergers have been difficult to consummate given the inhospitable regulatory environment. However one of the Trump administration’s earliest moves was to elevate Patrick Fuchs to chair the Surface Transportation Board. Fuchs, who joined the board in 2019 during President Donald Trump’s first term, is seen as a proponent of industry consolidation.
In 2023, Canadian Pacific closed a deal for Kansas City Southern, which was valued at about $31 billion.
Vena said at an industry conference in June that he would like to do large-scale M&A, while acknowledging the complex political and regulatory hurdles for any such deal.
An agreement to create a unified transcontinental rail network would provide major benefits, including eliminating the need for redundant interchanges of cross-country freight and enhancing efficiency, Stephanie Moore, a Jefferies analyst, said in a July 17 note following news reports of a possible transaction.
“A merger of this scale could recapture market share from trucking and potentially reinvigorate a subsector that has faced stagnant or declining volumes the past two decades,” she said.
On Thursday, Omaha-based Union Pacific reported second quarter net income of $1.9 billion, or $3.15 per diluted share. Results compare to 2024 second quarter net income of $1.7 billion, or $2.74 per diluted share.
When asked on the earnings call how tariffs were changing freight flows, Kenny Rocker, Union Pacific executive vice president for marketing and sales, said the company was seeing “a few green shoots,” with one customer shifting production from Asia into Mexico.