January 16, 2026: In a decision predicted by Railway Age (“Why Not a Merger Timeout?,” Watching Washington, November 2025 issue), the Surface Transportation Board in a unanimous decision rejected, “without prejudice,” the Union Pacific (UP)-Norfolk Southern (NS) major merger application as incomplete “because it does not contain certain information required by the Board’s regulations.” The joint UP/NS merger website on Jan. 16 had a brief statement saying the application would be refiled with the STB. But as of Jan. 19, there was no information (press release, brief statement, etc.) on either website about the rejection or what could happen next and when. UP is required to submit a letter of refiling intent to the STB by no later than Feb. 17.
“Merger applicants should be required to demonstrate, with specificity, the merger’s likely harm, as well as benefits, to small railroads, communities and modal competition; how they intend to attract on their lines new factories and warehouses as domestic manufacturing is revived; and how they will poach market share from non-union truckers, given rail volumes were stagnant following the 1990s merger wave,“ Railway Age Capitol Hill Contributing Editor Frank N. Wilner wrote.
STB Kicks it Back
“Under the law, the Board … must reject the application, and does so without prejudice to Applicants refiling a revised application remedying the deficiencies identified in the decision.” STB noted its decision (download below) “is based solely on the incompleteness of the Dec. 19 application and should not be read as an indication of how the Board might ultimately assess any future revised application.”
STB said regulations at 49 C.F.R. part 1180 “detail the information that must be contained in a major merger application. This includes: (1) full system impact analyses that include, among other things, market share projections for the entity to be created by the transaction; and (2) the entire merger agreement, including the submission of any contract or other written instrument that pertains to the transaction.
“Under 49 C.F.R. § 1180.7(b), Applicants are required to submit ‘full system’ impact analyses that include actual and projected market shares of certain revenues and traffic volumes demonstrating, among other things, the impacts of the transaction on competition. In the application, Applicants project that the merger will result in traffic growth, including diversions, and state that the full impacts of the transaction will not be realized until three years post-consummation. However, Applicants present as the projected market shares only the sum of actual 2023 UP and NS estimated market shares. The application does not contain future market share projections showing the combined effects of merger-related growth, diversions, and merger-influenced and other changes to market conditions that Applicants anticipate. Today’s decision finds that Applicants’ market impact analyses must necessarily project market shares beyond the transaction’s consummation date, and therefore that the application does not include the ‘projected market shares’ as required. These market-share projections are necessary because ‘[a]ny railroad combination,’ including an end-to-end combination, ‘entails a risk that the merged carrier would acquire and exploit increased market power.’ 49 C.F.R. § 1180.1(c)(2)(i).
“In addition, under 49 C.F.R. § 1180.6(a)(7), Applicants must provide copies of ‘any contract or other written instrument entered into, or proposed to be entered into, pertaining to the proposed transaction.’ Applicants’ submission to the Board includes their ‘Agreement and Plan of Merger’ document but does not include certain schedules and documents that are expressly made part of the merger agreement and that define Applicants’ obligations under it. Nor do Applicants attempt to justify why they withheld these materials from the Board.
“The plain text of the Board’s regulations requires submission of these documents. Such documents—disclosure schedules, exhibits, and other documents that supply terms of the agreement—may contain information that relates to competitive issues the Board must consider in its review of the proposed transaction. One of the merger agreement schedules, referred to as ‘Schedule 5.8,’ describes the contractual term ‘Materially Burdensome Regulatory Condition,’ which, if imposed by the Board or a court, would give UP the contractual right to walk away from the merger agreement. Because the application failed to provide the complete merger agreement and all contracts or other written instruments pertaining to the transaction, including Schedule 5.8, today’s decision finds the application is incomplete.”
“Further Deficiencies”
“In addition to these issues, today’s decision identifies further deficiencies with the application,” STB said. “Specifically, the decision finds that Applicants’ related application for acquisition of control of the Terminal Railroad Association of St. Louis is a significant transaction, not a minor transaction as submitted to the Board. Finally, the decision identifies several technical, minor issues that should be addressed in any revised application.”
“In accordance with statute, based on the findings in today’s decision, the Board must reject the application,” STB concluded. “The decision does not result in the dismissal of the merger proceeding, and Applicants are permitted to file a revised application in the docket, which would commence a new review by the Board for completeness. The decision directs Applicants to file a letter in the docket by Feb. 17, 2026, indicating if and when they anticipate filing a revised application. Any statutory time periods that follow from the timing of the filing of the application will be computed from the filing date of any revised application, if it is accepted.”
CN Statement
CN issued the following statement in response to the STB decision: “Today the Surface Transportation Board rightly rejected the UP–NS mergerapplication as incomplete. UP and NS failed to meet the basic requirements whenit came to providing all the necessary information in their initial filing. Simply put, this application is missing the last mile. This decision reinforces that a merger of this scale cannot be assessed on omissions or partial disclosure and must be evaluated on a full and transparent record, as required by the heightened standards under the new merger rules. A stronger record will allow the Board to determine whether the proposed transaction is in the public-interest and whether the time and scope limited measures offered by the applicants satisfy the requirement to enhance competition. As noted earlier, applicants had refused information critical to understand their perspective on anticipated competitive harms and inform the Board’s public-interest and competition analyses. The Board rightly found that applicants needed to provide that information. CN looks forward to participating robustly once UP- NS have submitted a complete application and encourages customers to file their notices of intent to participate so they can stay informed and continue to participate in the STB’s process. CN appreciates the hard work of the Surface Transportation Board members and their staff for their thorough and fair review of the application compared to the regulatory requirements.”
BNSF Statement
“We applaud the STB’s decision to reject the UP/NS merger application based on the application lacking core information critical to determining the proposed merger’s impact on competition,” said BNSF Chief of Staff and VP of Communications Zak Andersen. “We also appreciate the STB’s willingness to consider the views of all stakeholders as part of the regulatory review process.”
TD Cowen: “Rejection Without Prejudice; Back to the Drawing Board for UP/NS”
By Jason H. Seidl (Wall Street Contributing Editor), Elliot Alper and Uday Khanapurkar
The STB rejected UP’s STB filing without prejudice on Friday after the bell, stating the application was incomplete. This aligns with multiple channel checks that the application lacked critical details; we expect UP to move swiftly with changes to the application but acknowledge this should push timing back ~30 days, as only after accepting the application does the formal merger clock start.
We believe this was an outcome investors were somewhat prepared for, given commentary from our railroad channel checks as well as JBHT recently suggesting the filing lacked details on competitive impacts. However, given the long timeline associated with STB review and ample probability of delays, shares are likely to react. The Class I’s are permitted to file a revised application including requested detail, which restarts the one-month-after-acceptance deadline and subsequent review period. UP is required to submit a letter of refiling intent to the STB by 2/17, although this could come earlier. The STB’s review timeline calls for an approximately 13-month review (including acceptance and comments,) but we continue to acknowledge that this realistically could very well take a few months longer, given the scale of the proposal.
The primary requirements missing from the application include competitive impacts (forward-looking vs. the insufficient 2023 summed market shares across lanes/commodities/end markets etc.), and merger agreement disclosures, which include conditions, contracts and timing, among others. Both BNSF and CN applauded the STB’s decision (we fully expect a similar response from CP as well) in a release based on their commentary that it lacked critical information. We expect UP to keep the pedal to the metal on the edits but acknowledge the setback requires additional analysis that already had a two-week delay in December.
The STB is not bending its knee for an expedited/swift process, which has been pushed by Jim Vena. We continue to believe a final decision will be rendered in 2027, with our timeline now pushing to late1Q27/early 2Q27 at the earliest from 1Q27 due to the application’s rejection. We fully expect the arbitrage deal spread to widen when trading resumes this week.
