Is the biggest merger and acquisition in the US railroad industry born? United Pacific (UNP.US) is rumored to be considering acquiring Norfolk Southern (NSC.US)

The Zhitong Finance App learned that, according to people familiar with the matter, Union Pacific (UNP.US) is considering the acquisition of Norfolk Southern (NSC.US). If this deal is reached, it will be the largest railway industry merger and acquisition in US history. These negotiations are in the early stages, and there is currently no guarantee that the two companies will be able to reach an agreement. The deal will merge America's two largest railroad companies, and the combined company's market capitalization will be close to $200 billion.

As of press time, Norfolk Southern's stock (with a market capitalization of around $61 billion) rose 4.31% after the market. Union Pacific's stock price (with a market capitalization of around $136 billion) rose 0.5% after the market.

The acquisition of Norfolk Southern will completely transform the North American rail market. It will combine Union Pacific's rail network in the western United States with Norfolk's line on the east coast to form an integrated railway network. At the same time, it will also put intense competitive pressure on rivals CSX Transportation (CSX.US) and BNSF, a subsidiary of Berkshire Hathaway (BRK.A.US).

After years of industry consolidation, any merger of railway companies will most likely be subject to strict scrutiny by regulators. Mergers of a few major railroad companies in North America are relatively rare, partly due to difficulties in obtaining regulatory approval. In 2023, the Canadian Pacific Railway completed the acquisition of Kansas City Southern Railway, worth approximately $31 billion.

Speculations about large-scale mergers in the North American rail industry continue to grow, and people think that during Trump's presidency, the administration may be more inclined to promote industry integration.

Union Pacific CEO Jim Vena said at an industry conference in June that he wants large-scale mergers and acquisitions, but he also acknowledged that there are many complex political and regulatory barriers to such deals. He said, “It's not easy, and it's a complicated situation. At the end of the day do I think the merger would benefit the country? Definitely, definitely.”

At the same meeting, Norfolk Southern's chief financial officer Jason Zampi also expressed support for the merger of the two transcontinental railway companies. Zampi said, “This seems to have many benefits. The regulatory environment and the political environment are two issues we must address.”