Union Pacific inks $85B deal for Norfolk Southern
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Union Pacific has agreed to acquire Norfolk Southern in an $85 billion deal, creating an east-west transcontinental railroad and the largest in the U.S., the companies announced.
Why it matters: The railroad megamerger requires regulatory authorization and could push other competitors BNSF and CSX into a deal of their own.
What we're watching: The Surface Transportation Board's review process will allow stakeholders to weigh in, and the deal can't go through without the board's authorization.
- Union Pacific's pitch to the White House is expected to focus on the historic opportunity to "hammer in the golden spike," analysts have said.
- As for CSX, CEO Joe Hinrichs said he's open to a deal, Bloomberg reported. Buffett has denied reports BNSF has begun exploring a deal.
Catch up quick: Union Pacific CEO Jim Vena told investors during an earnings call last week that the railroad was in "advanced discussions" about a deal for Norfolk Southern.
- Last year, Norfolk Southern fended off an activist investor's attempt to wrest control following a disastrous derailment in East Palestine, Ohio.
Zoom out: Canadian Pacific's $31 billion deal for Kansas City Southern, which the STB approved in 2023, was the most recent railroad megamerger.
- KCS initially agreed to be acquired by Canadian Pacific in March 2021, but then bailed after Canadian National Railroad made a richer offer.
- KCS returned to the original suitor when the STB held up Canadian National's deal.
Flashback: Canadian Pacific sought to take over Norfolk Southern nearly a decade ago, but walked away from that attempt amid regulatory scrutiny.
Zoom in: Morgan Stanley and Wells Fargo are Union Pacific's financial advisers to Union Pacific, and BofA Securities is advising Norfolk Southern. Skadden, Arps is Union Pacific's legal adviser and Covington & Burling is providing legal advice on regulatory matters. Wachtell, Lipton is legal adviser to Norfolk Southern, and Sidley Austin is providing legal advice on regulatory matters.
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