Railroad operator Union Pacific (UNP) says it has reached an agreement to purchase rival Norfolk Southern (NSC) in a blockbuster $85 billion U.S. deal.
The merger would create America’s first coast-to-coast rail network and span about 50,000 miles across 43 U.S. states.
The deal would also put about 40% of all rail freight in the U.S. into one company, raising competition concerns in an industry that is viewed as vital to the economy.
Union Pacific currently operates west of the Mississippi River, while Norfolk Southern is mostly in the eastern part of America.
Management said that Union Pacific is offering cash and stock to buy Norfolk Southern for $72 billion U.S. Norfolk Southern’s debt takes the company’s enterprise value to $85 billion U.S.
If approved by regulators, the combined company will be called Union Pacific and have over 50,000 employees, most of them unionized.
The rail unions have already voiced concerns about the merger, saying it could reduce competition, undermine safety, and threaten job security.
The merger would cut the number of major railroads in the U.S. to five from six and comes two years after a Norfolk Southern train carrying hazardous materials derailed in Ohio, causing a major disaster in the town of East Palestine.
The Surface Transportation Board, a federal U.S. regulator, will have to review Union Pacific and Norfolk Southern’s merger proposal to assess its impact on competition.
Analysts say that Union Pacific and Norfolk Southern are betting that the administration of U.S. President Donald Trump, which is pushing deregulation, will approve the merger.
Both UNP and NSC stocks declined about 2.5% on news of the deal. Union Pacific’s stock has fallen 9% over the last 12 months to trade at $223.77 U.S. per share.
