Union Pacific to buy rival Norfolk Southern in $320 per share deal

Investing.com -- U.S. rail freight carrier Union Pacific Corporation (NYSE:UNP) will acquire its smaller rival Norfolk Southern Corporation (NYSE:NSC) in a cash-and-stock deal to create America’s first transcontinental railroad, according to the companies on Tuesday. 

Under the deal, Union Pacific will acquire Norfolk Southern in a transaction valuing Norfolk Southern at $320 per share, representing a 25% premium to Norfolk Southern’s 30-trading day volume weighted average price on July 16, the companies said in a joint press release. 

Shares of Union Pacific rose 0.8%, while Norfolk Southern fell about 2% in premarket trading following the news.

The transaction implies an enterprise value of $85 billion for Norfolk Southern, creating a combined enterprise worth over $250 billion.

Norfolk Southern shareholders will receive 1.0 Union Pacific common share and $88.82 in cash for each share of Norfolk Southern. This will give Norfolk Southern shareholders approximately 27% ownership in the combined company.

"Railroads have been an integral part of building America since the Industrial Revolution, and this transaction is the next step in advancing the industry," said Jim Vena, Union Pacific Chief Executive Officer.

Mark George, CEO of Norfolk Southern, added: "It is from this position of strength that we embark on this transformational combination."

The companies expect the merger to unlock approximately $2.75 billion in annualized synergies and deliver substantial long-term value for shareholders of both companies.

The combined railroad will connect the East and West Coasts, linking approximately 100 ports across North America. Both companies envision that every union employee who wants a job in the combined company will have one.

The merger aims to eliminate interchange delays, open new routes, expand intermodal services, and reduce transit times on key rail corridors.

Currently, Union Pacific and Norfolk Southern invest approximately $5.6 billion annually in infrastructure, innovation, and network expansion.

Based on 2024 results, the pro-forma combined company would have revenues of approximately $36 billion, EBITDA of approximately $18 billion, operating ratio of 62%, and free cash flow of $7 billion.

Jim Vena will lead the combined company as CEO and has committed to remain at Union Pacific for at least the next five years.

The combined company will be headquartered in Omaha, Nebraska, with Atlanta, Georgia remaining a core location focusing on technology, operations, and innovation.

The transaction is expected to close by early 2027.