By Sabrina Valle, Shivansh Tiwary and David French, Reuters
Omaha, NE – Union Pacific (UNP.N), opens new tab said on Tuesday it would buy smaller rival Norfolk Southern (NSC.N), opens new tab in an $85 billion deal to create the first U.S. coast-to-coast freight rail operator and reshape the movement of goods from grains to autos across the country.
If approved, the deal would be the largest ever buyout in the sector and combine Union Pacific’s stronghold in the western two-thirds of the U.S. with Norfolk’s 19,500-mile (31,400-km) network that primarily spans 22 eastern states.
The two railroads are expected to have a combined enterprise value of $250 billion and would unlock about $2.75 billion in annualized synergies, the companies said.
Railroad operators since the robber baron days of the late 1800s Gilded Age have dreamed of linking the U.S. Atlantic and Pacific Coasts by rail, and President Donald Trump’s administration may be conducive to such a mega deal.
“What I infer from the timing on this is they believe that the current political climate is going to be more favorable than it has been in recent history,” said Mike Steenhoek, executive director of the Soy Transportation Coalition, which represents the U.S. soybean industry.
The $320-per-share price implies a premium of 18.6% for Norfolk from its close on July 17, when reports of the merger first emerged.
The companies said last Thursday that they were in advanced discussions for a possible merger.
Talks between the two began in earnest in May, according to a source familiar with the matter.
The deal will face lengthy regulatory scrutiny amid union concerns over potential rate increases, service disruptions and job losses. The 1996 merger of Union Pacific and Southern Pacific had temporarily led to severe congestion and delays across the Southwest.
Norfolk said that Union Pacific would pay a termination fee of $2.5 billion in cash if the deal was terminated under specific circumstances.
The deal reflects a shift in antitrust enforcement under U.S. President Donald Trump’s administration. Executive orders aimed at removing barriers to consolidation have opened the door to mergers that were previously considered unlikely.
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