Union Pacific (UNP) Stock: Railroad Giant to Acquire Norfolk Southern in Historic $85 Billion Merger

TLDR

Table of Contents

Union Pacific will acquire Norfolk Southern for $85 billion in a stock-cash deal, creating a $200+ billion rail giant
Norfolk shareholders get one Union Pacific share plus $88.82 cash per share they own, valuing Norfolk at $320 per share
The merger would create the first coast-to-coast railroad operator with over 50,000 miles of track across 43 states
Both stocks fell despite the deal announcement, with Norfolk down 3% and Union Pacific down 2.4%
Companies plan to submit regulatory approval application within six months, though approval could take up to two years

Union Pacific and Norfolk Southern announced Tuesday they have agreed to merge in an $85 billion deal that would create America’s largest railroad operator. The transaction values Norfolk Southern at about $320 per share, a premium to its Monday closing price of $286.42.

Under the agreement, Norfolk shareholders will receive one Union Pacific share and $88.82 in cash for each share they own. Union Pacific plans to issue approximately 225 million shares to Norfolk shareholders, giving them a 27% stake in the combined company.

Union Pacific is acquiring Norfolk Southern in an $85 billion deal, the largest in railroad history
If approved, it will create a $250 billion giant covering:
• 43 states
• 100 ports
• 50,000 miles
• 50,000+ employees
It will be America's first transcontinental railroad. pic.twitter.com/hvWjGseskI
— Morning Brew ☕️ (@MorningBrew) July 29, 2025

The merger would combine Union Pacific’s western network with Norfolk Southern’s 19,500-mile system that spans 22 eastern states. Together, the companies would operate over 50,000 miles of track across 43 states.

This would mark the first time a single railroad operator could move goods from the Pacific Coast to the Atlantic using its own tracks. Union Pacific CEO Jim Vena said this fulfills former President Abraham Lincoln’s vision of a transcontinental railroad from 165 years ago.

The deal represents the largest railroad merger in history if approved. It would also rank as the biggest acquisition since Microsoft’s $75.4 billion takeover of Activision Blizzard in 2023.

Market Reaction and Financial Performance

Both stocks declined following the announcement despite the deal’s scale. Norfolk Southern shares fell 3% while Union Pacific dropped 2.4% in trading Tuesday.

Norfolk Southern reported second-quarter results Tuesday with revenue of $3.11 billion and adjusted earnings per share of $3.29. Both figures came in slightly below analyst estimates of $3.14 billion and $3.31 respectively.

Union Pacific had announced its own second-quarter results last week on the same day the companies confirmed merger discussions were underway. The cash portion of the deal will be funded through Union Pacific’s existing cash and new debt.

Norfolk Southern has outperformed peers this year despite being the smaller company in the merger. The combined entity would have a market value exceeding $200 billion based on current market capitalizations.

Regulatory Timeline and Approval Process

The companies plan to submit their regulatory application within the next six months. They will need to demonstrate how the merger benefits consumers and the broader market.

Railroad mergers typically face lengthy approval processes due to their size and market impact. The last major transaction in the sector took two years to gain approval.

Canadian Pacific’s $31 billion acquisition of Kansas City Southern required extensive regulatory review before receiving final approval. Industry experts expect similar scrutiny for this larger transaction.

The railroad sector has faced challenges from high labor costs, fuel prices, and weaker freight volumes in recent periods. However, increased domestic manufacturing could provide new opportunities for growth.

Mark George, Norfolk Southern’s CEO, said the deal would help rail companies “deliver for the whole economy.” The merger would create new efficiency opportunities across the expanded network.

TipRanks shows Norfolk Southern has a Moderate Buy consensus rating based on 9 Buy and 6 Hold recommendations. The stock’s consensus price target is $288.67, with the highest target at $323.

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