25.07.31UP Agrees to Acquire NS

The Union Pacific Railroad (UP) announced on Tuesday that it had reached an agreement to acquire the Norfolk Southern Railway (NS) in a deal worth $85 billion.

The merger would create the United States’ first coast-to-coast rail network and span some 50,000 miles across 43 states.

“This is a great, great merger for America,” said  Jim Vena, chief executive of UP. “It opens up more options for shippers.”

UP, which operates west of the Mississippi River, and NP, whose tracks are mostly east of it, said the combined company would deliver freight faster by eliminating the need to switch railroads and opening new routes.

UP is offering cash and stock to buy NS for $72 billion. Adding NS’ debt takes the company’s enterprise value to over $85 billion.

The combined company will be called UP and have over 50,000 employees, four-fifths of them belonging to unions. On Tuesday, rail unions expressed concern that the merger might undermine safety on the combined railroad and threaten job security.

The two railroads’ customers—large companies that ship coal, cars, chemicals and shipping containers filled with consumer goods—will be concerned that the combined company will use its power to charge higher rates.

Lawmakers are already expressing skepticism about the deal. In a letter sent on Tuesday to the transportation board, senators said they were concerned that the deal would “increase costs, create more unreliable service for U.S. shippers and reduce overall competition in a market where the number of carriers has diminished since 1950.”