Union Pacific, Norfolk Southern Seek Nod for $85B Merger
The deal to form the first U.S. transcontinental railroad now faces a contentious and lengthy regulatory review, with shippers and unions already voicing strong opposition.
Union Pacific (NYSE: UNP) and Norfolk Southern (NYSE: NSC) have officially set the stage for the railroad industry’s most significant transformation in decades, filing an application with the Surface Transportation Board (STB) for their proposed $85 billion merger. The deal, if approved, would create the first single-line transcontinental railroad in U.S. history, connecting ports and markets across 43 states.
However, the ambitious plan immediately enters a period of intense scrutiny. The STB review is expected to last 12 to 18 months, triggering a prolonged battle between the railroads and a growing chorus of opposition from customers and labor unions who fear the consequences of further industry consolidation.
In a joint announcement, the carriers argued the merger would enhance competition and create a more fluid, resilient supply chain. “The combination would improve transit times and reliability,” the companies stated in a press release, promising public benefits and a streamlined network that could shift significant freight volume from trucks to more fuel-efficient rails. Union Pacific, with its market capitalization of approximately $140 billion, and Norfolk Southern, valued at around $66 billion, are two of the nation's largest operators, and their integration would reshape North American logistics.
Despite the carriers' promises, powerful shipper groups and rail unions have mobilized to challenge the deal. Critics argue that decades of consolidation have already whittled the number of major U.S. railroads down to a handful, reducing competition and service quality. Organizations representing manufacturing, agriculture, and chemical interests have expressed grave concerns that the merger would create a duopoly in many regions, leading to higher rates and diminished service options for captive shippers.
Labor unions have also voiced opposition, citing worries over potential job losses, which are a common outcome of large-scale corporate mergers, and risks to operational safety.
The proposed merger is the first major railroad consolidation to be reviewed under stringent rules the STB adopted in 2001, which place a heavier burden on applicants to prove a deal is in the public interest. The board’s stance on major mergers will be closely watched.
The most recent significant precedent is Canadian Pacific’s acquisition of Kansas City Southern (CPKC), which the STB approved in March 2023. That deal, which created the first rail network connecting Canada, the U.S., and Mexico, was the first major railroad merger approved in over two decades. However, the STB attached numerous conditions to its approval, including an unprecedented seven-year oversight period to monitor the merger's impact on competition and service.
That conditional approval gives some hope to UNP and NSC, but it also signals that a green light is far from guaranteed and would likely come with significant concessions. As the STB begins its formal review, the rail sector, its customers, and Wall Street will be watching to see whether the vision of a seamless coast-to-coast network can overcome powerful fears of a market with one less competitor.