A Norfolk Southern locomotive at a rail yard in Chicago. (Jim Vondruska/Bloomberg)
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Union Pacific Corp. is nearing an agreement for a stock-and-cash deal for Norfolk Southern Corp. that would value the smaller rival at about $320 a share, people familiar with the matter said, in what would be the rail industry’s biggest tie-up in history.
The offer would comprise about two-thirds stock and one-third cash, said the people, who asked not to be identified because the information is private. At $320 a share, Norfolk Southern’s equity value would be about $72 billion, according to Bloomberg calculations.
That price would represent a roughly 23% premium to Norfolk Southern’s stock before the first reports of a potential deal this month. Bloomberg News reported previously that a transaction could be announced as soon as this week. Norfolk Southern is set to report second-quarter earnings July 29.
Norfolk Southern shares closed at $286.42 in New York on July 28, giving the company a market capitalization of $64.6 billion. Omaha, Neb.-based Union Pacific has a market value of roughly $136 billion.
While discussions between the two companies are at an advanced stage, the terms could still change, the people said.
A spokesperson for Union Pacific declined to comment. A representative for Norfolk Southern didn’t immediately respond to a request for comment.
Union Pacific and Norfolk Southern announced July 24 that they were in advanced talks to combine. A merger would transform the North American rail market, marrying Union Pacific’s network across the western U.S. with Norfolk’s East Coast routes. It would heap pressure on rivals including CSX Corp. and Berkshire Hathaway Inc.’s BNSF to pursue deals of their own to keep pace.
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