Matt Ott
Union Pacific and Norfolk Southern confirmed that they are in “advanced” merger talks to create a single US railroad with services that extend from the east to the west coast.
The Associated Press reported last week that companies were discussing the partnership, but neither company allowed it until Thursday morning.
A potential merger will combine the largest and smallest of the country’s six major freight railroads.
Independent rail analyst Tony Hatch said the railroad disclosure suggests that negotiations are further than previously thought.
“What people interpret from that is that they somehow understand what the profit is,” Hatch said, adding that benefits such as efficiency are handed over to the customer. It will be key to obtaining regulatory approval under the enhanced competition provisions of the Surface Transportation Board.
There has been extensive debate as to whether such a merger will be approved by the STB, which has established a high standard for integration in key industries.
It is mainly due to the aftermath of industry integration nearly 30 years ago, including Union Pacific. Union Pacific merged with the South Pacific in 1996, and the partnership extended traffic on the US rails. Three years later, the Conrail was split into Norfolk Southern and CSX, with more backups for the Eastern rail.
However, just two years ago, STB approved its first major railway merger in over 20 years. Canada Pacific acquired Kansas City Southern for $31 billion to establish the CPKC Railroad in that contract supported by large shippers.
Still, some of the reasons behind the approval involve two smallest major railways, with Kansas City Southern being the only operator with a direct line to Mexico. The total regulatory railroads will benefit trade across North America.
The deal left only six major freight railroads. This can be a problem when regulators consider whether to approve a transaction between Norfolk Southern and Union Pacific.
To be approved, major railway mergers must show that it will strengthen competition and serve the public interest under the regulations established in 2001.
Hatch also said that large numbers of shippers like Amazon, Dow and Us Steel (using huge amounts of cargo capacity) are likely to weigh with regulators as the merger process develops. These shippers must first determine whether the merger will improve or harm the ability to move equipment or products.
“If shippers want this merger, they’ll make it clear,” Hatch said. “They really have cards.”
Jeff Window, an industry analyst at Edward Jones, is hoping for a long-term regulatory process as STB seeks to determine whether the merger meets standards for strengthening competition.
“We believe that transcontinental railroads have benefits, but we feel the regulatory approval process will be long and difficult,” Window said.
Also on Thursday, Union Pacific reported that adjusted profits increased to $1.8 billion in the second quarter.
Omaha, Nebraska’s revenue per share rose to $3.03, falling below Wall Street expectations and easily surpassed its share profit of $2.71 reported in the same period last year. Analysts were expecting a profit of $2.91 per share for the most recent quarter.
Operating revenues rose 2% from last year to $6.2 billion, the company said.
Union Pacific shares fell 2% at the opening bell on Thursday to $226.70 each. They collapsed to around $208 in early April, the lowest level of 2025, as President Donald Trump deployed cleaning fees that he threatened to overturn global trade.
Original issue: July 24th, 2025, 2:44pm EDT
