Union Pacific seeks to form America's first transcontinental railroad in $85 billion deal

The Omaha-based railroad has signed an agreement to buy Norfolk Southern and become America’s first railroad operating coast-to-coast, spanning more than 50,000 miles, serving 43 states and reaching “nearly every corner of North America,” said Union Pacific CEO Jim Vena.

And both railroads made clear that if the move is approved by federal regulators, the resulting railroad to be known as the Union Pacific Transcontinental Railroad would be based in Omaha.

Atlanta, Georgia, Norfolk Southern’s headquarters, will remain a core location for the combined organization with a focus on technology, operations and innovation, the railroads said.

“It builds on President Abraham Lincoln’s vision of a transcontinental railroad from nearly 165 year ago,” Vena said in a statement that harkened back to UP’s historic roots in Omaha.

Omaha officials applauded the announcement. Omaha Mayor John Ewing noted that the city and Union Pacific have a long, proud shared history that dates back to 1862.

“U.P.’s decision to remain headquartered in Omaha and keep its name gives us confidence in a long, proud shared future,” Ewing said in a statement.

The Associated Press reported that Union Pacific is proposing an $85 billion deal with an offering of $20 billion in cash and stock. Norfolk Southern shareholders would receive one U.P. share and nearly $89 in cash for each one of their shares as part of the deal that values Norfolk Southern at roughly $320 per share.

Norfolk Southern closed at just over $260 a share earlier this month before the first reports speculating about a deal. U.P. shares closed at the end of trading Tuesday down 2.4%, at $223.77. Norfolk Southern shares closed down 3% at $277.70.

While the proposed merger faces regulatory scrutiny, Vena made an argument for it Tuesday, saying the deal would fundamentally change how freight moves.

“A single coast-to-coast network will deliver faster, more competitive service by eliminating car touches and interchange delays, opening new routes, expanding intermodal services, and ensuring faster transit times on key rail corridors,” Vena said.

The U.P. also noted that the transcontinental railroad would “compete more effectively with Canadian railroads to win back U.S. freight volume and American jobs.”

The railroads said the combination would additionally unlock rail options for shippers in regions where railroad connections are less efficient, such as the Ohio Valley and both sides of the Mississippi River.

And with access to 10 international exchanges and approximately 100 ports, they said, the transcontinental railroad “will unlock strong international trade routes and offer greater access to U.S.-made goods.”

Vena also noted Union Pacific and Norfolk Southern are two of the strongest operating railroads, with a combined 360 years of history. Norfolk Southern is even older than U.P., dating to 1827 — 35 years before the founding of U.P.

The companies expect to file an application for review of the transaction with the Surface Transportation Board within six months. The companies seek to close the deal by early 2027, but until then would continue to operate separately.

Merger faces regulatory hurdles

Though the merger faces regulatory hurdles, U.P. and Norfolk Southern may be hoping for a favorable decision given that the current administration in Washington appears more receptive to such linkages, said Nathan Huynh, a professor of civil and environmental engineering at the University of Nebraska-Lincoln.

Federal regulators earlier this year approved the merger of credit card giants Capital One and Discover. And Canadian Pacific Railway several years ago acquired Kansas City Southern Railway, with the companies now operating under the name CPKC.

Regulators, Huynh said, approved that linkage because the railroads’ routes didn’t overlap. The same goes for U.P. and Norfolk Southern.

Like Vena, Huynh said he believes the merger would benefit the transportation system in general because of the coordination it would provide.

Third-party logistics providers would be dealing with one company rather than two, with fewer handoffs. For the railroad, planning routes from one location to another within a single system also becomes easier.

Railroads, he said, compete with trucking companies while maintaining costly infrastructure. U.P. noted that the combined railroad would decrease highway congestion and reduce wear-and-tear on taxpayer-funded roads.

“They are merging because it makes economic sense and they view that it will better serve their customers and (keep them) competitive in this industry,” said Huynh, director of the Nebraska Transportation Center.

Huynh said he doesn’t believe that a merged company would simply be able to charge whatever rates it chooses — again, because of competition.

U.P. currently competes in the west with BNSF Railway, owned by another Omaha icon, Berkshire Hathaway. It’s been speculated that if the deal goes through, BNSF and eastern railroad CSX could face pressure to join forces.

The UNL center partners with both U.P. and BNSF on a summer program aimed at familiarizing high school students with careers in rail transportation.

The railroads did not offer specifics on how the merger could impact employment in Omaha or Nebraska, but local officials appeared optimistic.

U.P. employs about 5,500 people in Nebraska, with about 3,000 of them in the Omaha area, and operates more than 1,000 miles of track in the state. The companies said union employees, including train crew members and mechanical and engineering workers, will have job opportunities with the combined company. Rail volume growth is also expected to drive additional employment in towns and cities across the network

Heath Mello, president and CEO of the Greater Omaha Chamber, said the chamber is especially proud that U.P. continues to call Omaha home.

“This partnership will strengthen domestic supply chains, open new markets and reinforce our nation’s global competitiveness,” he said in a statement. “(U.P.’s) leadership in reshaping the future of freight transportation reinforces our region’s central role in building a more connected and prosperous nation.”

U.S. Sen. Pete Ricketts, R-Nebraska, also applauded the announcement, calling U.P. “an engine for growth” in Nebraska.

“Consolidating another railroad company’s headquarters at the Union Pacific headquarters in Omaha will benefit our state even more,” he said in a statement. “This has the potential to create jobs, increase wages, and streamline the supply chain. This merger is a great deal for Nebraska and America.”

For many, Union Pacific is a name that is already synonymous for transcontinental rail service.

The iconic railroad was incorporated in 1862 with a mission from President Lincoln and Congress to help build the nation’s first transcontinental railroad, starting west from the Missouri River.

Union Pacific established shops in Omaha near today’s downtown riverfront in 1863 and began laying track in 1865. Four years later, it met up in Utah with the Central Pacific, which had laid track east out of San Francisco.

While the railroad’s operational headquarters has always been based in Omaha, the much smaller corporate headquarters has been based elsewhere, first for decades in New York City, then Bethlehem, Pa., and then Dallas.

Its corporate headquarters returned to Omaha in 1999 as the railroad was preparing to build its new headquarters building at 14th and Douglas Streets, which opened in 2004.

The company had conducted a national search around that time before deciding to put the headquarters where its operations were based.

The railroad also has a large dispatching center downtown, just east of the Old Market. The Harriman Dispatch Center is responsible for train movements across the railroad’s 23-state network — a network that could now one day enlarge.

Nebraska is also home to U.P.’s Bailey Yard in North Platte, the world’s largest classification yard, responsible for sorting and building trains.

Norfolk Southern runs rails in 22 eastern states and the District of Columbia.

Union Pacific ranks 170th on Fortune 500 list of the nation’s largest companies. It’s also one of four Fortune 500’s based in Omaha, along with Berkshire Hathaway (No. 6), Kiewit (No. 239) and Mutual of Omaha (No. 306).

Per capita, the Omaha metro boasts more such headquarters than New York City or Chicago, the metro areas that are home to the most such companies.