The speculation is over: Union Pacific and Norfolk Southern at 7:00 AM EDT announced their agreement to, in a combined cash and stock transaction valued at more than $250 billion, merge and create the first U.S. transcontinental railroad. Union Pacific is the acquiring company.
Under the terms of the agreement, Union Pacific will acquire Norfolk Southern in a stock and cash transaction. NS shareholders will receive, for every share of NS stock, one share of UP stock plus $88.85 in cash, “implying a value for Norfolk Southern of $320 per share based on Union Pacific’s unaffected closing stock price on July 16, 2025, and representing a 25% premium to Norfolk Southern’s trading day volume weighted average price on July 16, 2025,” both railroads stated. “The value per share implies an enterprise value of $85 billion for Norfolk Southern, resulting in the creation of a combined enterprise of more than $250 billion.”
Union Pacific will issue a total of approximately 225 million shares to Norfolk Southern shareholders, “representing 27% ownership in the combined company on a fully diluted basis, and providing the ability of Norfolk Southern shareholders to participate in the upside of the combined company’s growth opportunities and synergies. The agreement is structured without a voting trust and includes a $2.5 billion reverse termination fee. The cash portion of the transaction will be funded through a combination of new debt and balance sheet cash. At closing, the combined business will have a strong balance sheet and Debt to EBITDA of approximately 3.3x, supporting a balanced capital allocation strategy. The combined company will continue to prioritize and maintain a strong balance sheet and investment grade rating. Based on 2024 results, the pro-forma combined company would have revenues of approximately $36 billion, EBITDA of approximately $18 billion, operating ratio of 62%, and free cash flow of $7 billion. The transaction is expected to be accretive to Union Pacific’s adjusted EPS per share in the second full year after closing and rising to high single digit accretion thereafter.” As well, both companies will suspend share repurchases but will continue to pay dividends.
The transaction, expected to be filed with the Surface Transportation Board within six months, undergo a 15-month review process and close by early 2027, is “expected to unlock approximately $2.75 billion in annualized synergies and deliver substantial long-term value for Union Pacific and Norfolk Southern shareholders,” the Class I’s said. The combined company will be headquartered in Omaha, Neb. Atlanta, Ga. “will remain a core location for the combined organization over the long-term with a focus on technology, operations and innovation, among other priorities.”
Jim Vena, Union Pacific CEO, will be CEO of the combined company, dubbed the “Union Pacific Transcontinental Railroad,” and “has committed his intent to remain at Union Pacific for at least the next five years,” UP and NS noted. “Through integration and beyond, talented leaders from both companies will work together to deliver on the combination’s full value creation potential. The experienced Union Pacific and Norfolk Southern management teams will continue to independently run each company until the transaction’s closing.” At closing, three Norfolk Southern Directors, including Mark George and Richard Anderson, are expected to join the Union Pacific Board of Directors after completing the corporate governance process.
Vena and George acknowledged that combining the two companies “will not be easy,” but that their cultures “are closely aligned” and that both will continue to operate “without distraction.”
“These legendary companies will seamlessly connect more than 50,000 route-miles across 43 states from the East Coast to the West Coast, linking approximately 100 ports and nearly every corner of North America,” UP and NS said. “This combination will transform the U.S. supply chain, unleash the industrial strength of American manufacturing and create new sources of economic growth and workforce opportunity that preserves union jobs. Together, [we] aim to be the safest railroad in North America and deliver the service customers rely on with operational excellence. The combined company will deliver faster, more comprehensive freight service to U.S. shippers by eliminating interchange delays, opening new routes, expanding intermodal services, and reducing distance and transit time on key rail corridors. A more truck-competitive solution, the Union Pacific Transcontinental Railroad will decrease highway congestion, reducing wear-and-tear on taxpayer-funded roads.”
“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 Vena. “Imagine seamlessly hauling steel from Pittsburgh, Pa. to Colton, Calif. and moving tomato paste from Heron, Calif. to Fremont, Ohio. Lumber from the Pacific Northwest, plastics from the Gulf Coast, copper from Arizona and Utah, and soda ash from Wyoming: Right now, tens of thousands of railroaders are moving almost everything we use. You name it, and at some point, the railroad hauled it. This combination is transformational, enhancing the best freight transportation system in the world. It’s a win for the [U.S.] economy, it’s a win for our customers, and it’s a win for our people. It builds on President Abraham Lincoln’s vision of a transcontinental railroad from nearly 165 years ago and advances our Safety, Service and Operational Excellence Strategy. I am confident this historic transaction will enhance competition to benefit customers, communities, and employees while delivering shareholder value.”
“Norfolk Southern, like Union Pacific, is a railroad integral to the U.S. economy, with a storied 200-year legacy of serving customers across 22 states in the eastern half of the nation,” said George. “Our safety, network, and financial performance is among the best we’ve had as a company, as is our customer satisfaction. And it is from this position of strength that we embark on this transformational combination. We are confident that the power of Norfolk Southern’s franchise, diversified solutions, high-quality customers and partners, as well as skilled employees, will contribute meaningfully to [the U.S.’s] first transcontinental railroad, and to igniting rail’s ability to deliver for the whole [United States] economy today and into the future. Union Pacific is a true partner that shares our belief in rail’s ability to deliver for all stakeholders simultaneously, and we are excited for our future together.”
UP and NS stated that they “envision every union employee who wants a job in the combined company will have one. Union Pacific and Norfolk Southern union employees—including train crew, mechanical and engineering—will have job opportunities with the combined company. Beyond job security, expected rail volume growth will drive additional employment opportunities in towns and cities across the combined rail network. Non-union workers will have opportunities to grow as part of a larger, combined enterprise.” They qualified this statement by noting that “railroad employees are among the most highly compensated workers across U.S. industries. They also receive a generous retirement that exceeds other workers in the private sector, as well as top tier health care benefits.”
Both CEOs issued letters to their employees (download below).
Clearly framed as a message to the current Presidential Administration and its “America First” mantra, Union Pacific (which has no fewer than six border crossings with Mexico, owns 26% of Ferromex and works closely with CN on services such as Falcon Premium for intermodal traffic in Mexico) and Norfolk Southern noted that, combined, they “invest approximately $5.6 billion annually in infrastructure, innovation, and network expansion. U.S. freight railroads move approximately 1.5 billion tons of material and goods every year. The transcontinental railroad will compete more effectively with Canadian railroads to win back U.S. freight volume and American jobs.” Vena said that UP capex will “remain steady” for the next few years at roughly $3.5 billion to 3.8 billion annually. NS capex, currently at about $2 billion annually, “will see a two-year spike” in preparation for the combined operation, George said.
“The combination will unlock rail options for shippers in regions where railroad connections are less efficient, such as the Ohio Valley and on both sides of the Mississippi River (‘Watershed‘ markets), creating a more accessible, sustainable, and lower-cost supply chain for manufacturers and consumers,” UP and NS added. “The Union Pacific Transcontinental Railroad will unlock strong international trade routes and offer greater access to U.S.-made goods. Customers will benefit from seamless, single-line service across the country. The combination will improve transit times, removing several days by eliminating car touches and interchanges where rail cars are handed off. Customers will have the ability to quickly receive single-line rate quotes with one system to track freight, enabling real-time decisions that optimize supply chains. Short lines and their shippers will have access to a unified rail network with a single Class I interface, new services, and reduced gateway delays. U.S. ports served by the transcontinental railroad will have expanded reach and faster access to new markets.“
In connection with the transaction, Union Pacific said it intends to file with the SEC a Registration Statement on Form S-4, which will include a Joint Proxy Statement/Prospectus with respect to the shares of Union Pacific’s common stock to be issued in the transaction and for Union Pacific’s and Norfolk Southern’s respective shareholders. “The definitive Joint Proxy Statement (if and when available) will be mailed to shareholders,” UP said.
Will the Norfolk Southern name and iconic “Thoroughbred” prancing horse logo on a black locomotive carbody fade into history as another fallen flag—just like all prior UP acquisitions (Missouri Pacific, Western Pacific, Missouri–Kansas–Texas, Chicago, Rock Island & Pacific, Chicago & North Western, Southern Pacific)? In a joint interview with Mark George, Jim Vena said it will not. That remains to be seen.
UP and NS created a website for the merger.
Morgan Stanley & Co. LLC and Wells Fargo are serving as financial advisors to Union Pacific. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor to Union Pacific on the acquisition, with Covington & Burling LLP providing legal advice on regulatory matters. BofA Securities is serving as exclusive financial advisor to Norfolk Southern. Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Norfolk Southern, with Sidley Austin LLP providing legal advice on regulatory matters.
