Two of the nation’s leading railways may soon join forces, creating the country’s first coast-to-coast freight railroad.
Union Pacific Corp. announced a bid to purchase Norfolk Southern Corp. Tuesday for $85 billion in stock and cash. The deal would seamlessly connect more than 50,000 route miles across 43 states, linking approximately 100 ports “and nearly every corner of North America” according to a joint statement from the companies.
The announcement follows reports of merger talks between the two railroads earlier this month.
Some industry voices are already speaking out against the deal. The nation’s largest rail union said Tuesday it will oppose the acquisition when it comes before the federal Surface Transportation Board for review.
The transportation division of SMART—the International Association of Sheet Metal, Air, Rail and Transportation Workers—released a press statement expressing concerns about “the real-world impact such consolidation could have on rail workers, safety, service quality, and the long-term health of the freight rail industry.”
Logistics industry reaction is mixed, with some leaders pointing to operational synergies from the deal that could benefit the broader supply chain. At the same, time, there is skepticism that with reduced rail competition, savings will go to the combined company’s bottom line rather than passed along via lower shipping rates.
“If [Union Pacific CEO] Jim Vena and his team can deliver seamless coast-to-coast service while regulators keep pricing competitive, this could genuinely transform how American manufacturing competes globally,” industry consultant James Shefelbine, a principal at consulting firm PraxiChain, said Tuesday. “But if this turns into another consolidation play where reduced competition drives up rates, we’ll have learned nothing from past mistakes. The fact that both stocks tanked on the announcement tells me the market’s asking the same tough questions I am—will this create real value for customers, or extract more profit from a captive shipping base?”
Union Pacific shares were down 3.4% at $221.46 on Tuesday afternoon, while Norfolk Southern shares were down 3.2% at $277.15.
DC Velocity’s Susan Lacefield contributed to this report.
