Pecohub The $85 billion merger deal between Union Pacific and Norfolk Southern announced Tuesday joins 50,000 miles of railroad tracks that span from the Jersey shore to the ports in California.
The union would create a single company controlling coast-to-coast rail shipments for the first time in U.S. history—a feat Union Pacific says would speed up shipping and make supply chains more efficient.
“Railroads have been an integral part of building America since the Industrial Revolution, and this transaction is the next step in advancing the industry,” said Union Pacific Chief Executive Officer Jim Vena, the architect of the plan.
Union Pacific said Tuesday that it had agreed to acquire Norfolk Southern in a stock and cash deal pricing Norfolk at $320 per share, with an enterprise value of $85 billion. The deal still requires regulatory approval from the Surface Transportation Board. The board’s new chairman, Patrick Fuchs, has said he plans to expedite rulings and legal decisions.
Historically, rail tie-ups have spawned massive traffic snarls—and some crashes—prompting regulators to put the brakes on such deals. It is a question that regulators will now closely examine as they assess the deal for approval.
Regulators have been skeptical of deals that could create a transcontinental rail juggernaut. They have worried that granting one company too much control could result in price hikes, service disruptions and lower investment in safety improvements.
If the merger is allowed to proceed, executives at Union Pacific say a transcontinental railroad could improve rail service, provide shippers with a one-stop shop and increase port access for local manufacturers and farmers looking to export their goods.
However, some labor unions and shippers oppose the deal. SMART-TD, the union representing conductors, said railroad mergers often lead to job losses and poorer service. A trade group representing chemical companies, which are among the largest users of freight rail, said they are opposed to any merger that would boost railroads’ pricing power.
A merger between two of the biggest U.S. railroads “threatens to leave American manufacturers, farmers and energy producers with even fewer options to ship by rail,” said Scott Jensen, a director at the American Chemistry Council.
Regaining regulators’ trust
America’s East and West Coasts were first linked by rail in 1869, when a ceremonial “golden spike” was driven into a final rail in Utah connecting two companies’ tracks. That transcontinental railway depended on more than one operator.
Today, four major railroads—two west of the Mississippi River and two to the east—represent more than 90% of U.S. rail traffic. Amtrak carries passengers from coast to coast but operates mostly on tracks owned by freight railroads.
Vena, a longtime railroader who started his career in Canada, took the helm at Union Pacific in 2023.
He is a protégé of the late Hunter Harrison, who pioneered precision scheduling, an operating model that aims to cut costs in part by running trains on tighter schedules, removing excess equipment and trying to put cargo on a return trip rather than having a train return empty. He boosted productivity at Union Pacific, improving metrics such as lowering dwell time for railcars and increasing train length.
U.S. railroads lost trust with regulators during the pandemic, when they struggled to sort out bottlenecks that contributed to a global supply-chain crisis.
Railroad operators since then have worked to improve working conditions and service, including setting up partnerships with other railroads to speed up the interchange of railcars and offer new routes to their customers.
Vena argues that having fewer interchanges for railcars as they move across the U.S. would improve railroad service. He and others in the rail industry also hope that a transcontinental railroad would push more shippers to use trains instead of trucks, and slow a yearslong trend of cargo volume shifting from rails to roads.
The most recent railroad merger to gain U.S. approval was the $28 billion tie-up of Canadian Pacific Railway and Kansas City Southern, which created the first freight rail network linking Canada, the U.S. and Mexico.
U.S. antitrust officials warned that further consolidation could reduce competition and reduce incentives to invest in research and implement new safety technologies.
A computer outage after the Canadian Pacific Kansas City merger caused increased delays, missed switches and congestion in the southern states, prompting Surface Transportation Board Chairman Fuchs to write a letter in June rebuking the company’s CEO, Keith Creel. In response, CPKC said that there had been problems transitioning Kansas City Southern’s computer systems. The railroad recently said that service had largely recovered.
