Union Pacific and Norfolk Southern explore a $200-billion cross-continental railroad merger

Union Pacific, the largest US freight railroad operator, is exploring a possible acquisition of Norfolk Southern to create a $200-billion coast-to-coast rail network, a person familiar with the matter said.

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Talks are in early stages, the person said, with no guarantee talks will progress or that any deal would pass what would be expected to be a lengthy, detailed regulatory review. The two companies declined to comment.

Any deal to unite two of the six largest freight rail operators in North America is likely to draw intense regulatory scrutiny. Major shippers in the steel, chemical and grain industries are expected to lobby against any further concentration in an industry that has consolidated from over 100 Class I railroads in the 1950s to just six today.

Union Pacific shares fell 2.7% in Friday afternoon trading, while Norfolk Southern rose 1.52%.

A combination would mark a shift in the US freight rail landscape, creating a single-line network stretching from coast to coast, changing the current divide between western and eastern regional operators.