Union Pacific wants to buy Norfolk Southern in a deal of $ 85 billion First transcontinental railroad In the US, and potentially triggers a final wave of rail merger across the country.
The proposed merger, declared on Tuesday, will marry the huge rail network of Union Pacific in the west, which is with the rail of Norfoch with Norfoch rail in 22 eastern states and columbia districts.
The nation was first added by the rail in 1869, when a Golden Railroad Spike was operated in Utah to symbolize the relationship of east and west coasts. Nevertheless, no single unit has controlled that coast.
Railroads argue that a merger will streamlide the delivery of raw materials and goods natively, when the shipment is handed over the shipment between the railroad. The AP first reported the merger talks earlier this month when the railroad confirmed the discussions last week.
Any deal will be closely examined by antitrust regulators, who have set much more often for rail deals after the previous consolidation in the industry, leading to large -scale backup and snake traffl.
Pressure on remaining railroads
If this deal is approved, the remaining two major American railroads – BNSF and CSX – will have to face tremendous pressure to merge to form a second transcontinental railroad so that they can compete. Two other major railroads of the continent – Canadian National and CPKC – may also be included. The Canadian rail spreads all of that nation and feeds in the US. CPKC Rail Stretch into Mexico in South
In the Gulf, some large shippers such as chemical plants, such as the possibility of monopoly may be careful with the deal that can have immense impact on rates, but other major railway customers such as Amazon and UPS, if the package means that the package will arrive faster and firmly. Those large companies, with unions and communities across the country, will have a chance to weigh before the US Surface Transport Board.
Consumers can benefit if transcontinental railway shipping rates and delivery time reduces the time of delivery. Union Pacific stated that jointly, railroads would improve delivery time.
There is speculation that the deal may win approval under the Pro-Business Trump Administration, but STB is currently divided between two Republicans and two Democrats. The board is led by a Republican, and Trump will appoint a fifth member before considering the deal.
The Union is offering $ 20 billion cash and a part of its stock to complete the Pacific deal. Norfolk Southern shareholders will receive an up share for each of their stocks and $ 88.82 cash, which is as part of the deal that gives NS importance to about $ 320 per share. Norfoch Southern shut down more than $ 260 in early this month earlier this month, which used to guess the earlier report.
Union Pacific’s stock fell to $ 224.98 in premarket trading, while the stock of Norfolk Southern increased to more than 3% $ 277.40.
Union Pacific CEO Jim Vena, who has made the merger champion, said that Pacific from Northwest and Gulf Coast and Steel produced in Pittsburg and plastic produced on steel will all reach more originally to their destinations.
Vena told investors on Tuesday, “This is based on the outlook of a transcontinental railroad about 165 years ago by President Abraham Lincoln, and will enter a new era of American innovation.”
30 to 6
The American railroads have already gone through widespread consolidation. In the early 1980s there were more than 30 major freight rail routes. Today, six major railroads handle most of the shipments across the country.
Berkshire Hathaway -owned Western rival BNSF, if it chooses, is the war chest to carry forward the acquisition of CSX in the east. CEO Warren Buffett is sitting on more than $ 348 billion cash and the Ghagh dealmaker may want to swing for the last time before stepping down at the end of the year.
Buffett recently threw cold water on reports that he had advised Goldman Sachs on a possible rail deal to advise on a possible rail deal. Interview with CNBCBut he rarely uses investment bankers. Buffett reached an agreement to buy parts of BNSF rail, which was not already already for $ 26.3 billion after a private meeting with its CEO over a decade ago.
Nevertheless, there is a widespread debate on whether a major rail merger will be approved by the Surface Transport Board, which has established a higher bar for consolidation in the important railway industry.
This is largely due to a consolidation in the US about 30 years ago, which included the Sangh Prashant. It merged with Southern Pacific in 1996 and tie-up caused an extended period of traffic on American rail. Three years later, Conneril was divided by Norfolk Southern and CSX, causing more backup to the east.
“We are committed to ensure that this is not the case in this case,” said Norfolk CEO Mark George. He said that the railroad would plan the next two -year plan for a smooth integration, before the deal can be approved.
Just two years ago, STB approved the first major rail merger in more than two decades. In the deal that was supported by Big Shippers, Canadian Pacific acquired the Canadian City Southern for $ 31 billion to build a CPKC railroad.
The deal had compelling factors, however, added the two smallest major cargo railroads. Joint railroad, regulators argued, would benefit trade in North America. The deal declared on Tuesday merged the country’s largest freight railroad with the smallest.
Union Pacific and Norfolk Southern said they expect to submit their application for approval within the next six months and hope that the deal will be approved by the beginning of 2027. They guess that they would be able to abolish the cost of $ 1 billion annually, but Vena said that each union worker of both railroads should still have a job. Railroads also guess that they will be able to promote revenue up to at least $ 1.75 billion each year by winning more business than trucking companies and other railroads.
On Tuesday, Norfolk Dakshin reported a $ 768 million second-quarter profit, or $ 3.41 per share, as the volume increased by 3%. It is a year ago $ 737 million, or above $ 3.25 per share, but the results were affected by its 2023 East Palestine derailment and insurance payments from restructuring costs.
Without one -time factors, Norfolk Southern made $ 3.29 per share, just below $ 3.31 per share, which was surveyed by analysts by factset research.
