Union Pacific agrees to buy Norfolk Southern

Merger would create $85 billion railway

- PETER EAVIS

Union Pacific, a freight rail giant, announced Tuesday that it had reached an agreement to acquire Norfolk Southern, another large railroad, in a deal worth $85 billion.

The merger would create the United States' first coast-to-coast rail network and span some 50,000 miles across 43 states. But the deal would put around two-fifths of rail freight in the hands of one company, raising fears that it would reduce competition in a crucial industry.

Union Pacific, which operates west of the Mississippi River, and Norfolk Southern, whose tracks are mostly east of it, said the combined company would deliver freight faster by eliminating the need to switch railroads and opening new routes.

"We will deliver a railroad that is like none other in North America that provides the best service for customers," CEO Jim Vena of Union Pacific said during a call with analysts Tuesday. The combined company will be called Union Pacific, and Mr Vena will be its CEO.

"It will make the railroads more efficient," said Tony Hatch, a veteran rail analyst at ABH Consulting. "And it adds reliability, which is the biggest rail issue."

Union Pacific is offering cash and stock to buy Norfolk Southern for $72 billion. Adding Norfolk Southern's debt takes the company’s enterprise value to over $85 billion.

The combined company would have over 50,000 employees, four-fifths of whom belong to unions. On Tuesday, the Brotherhood of Railroad Signalmen, a rail union, said it was concerned about the merger's impact on rail safety.

"Cuts to staffing, rushed integrations and top-down decisions that ignore the craft-knowledge of railroaders are a recipe for diminished safety and growing distrust," Mike Baldwin, the brotherhood's president, said in a statement.