Union Pacific Corp agreed to receive Norfolk Southern Corp in a cash transaction and stock worth $ 85 billion.
The agreement will create a transcontinental railway giant that connects the vast Western US network Union Pacific with routes on the east coast of Norfolk Southern. If approved, the agreement would be the largest purchase in the field.
Details of business and appreciation
Norfolk Southern shareholders will receive one share of the Pacific of the Union and $ 88.82 in cash for each share of Norfolk. The Union Pacific will issue approximately 225 million shares to Norfolk Southern Investors, which represents a 27% share in a combined company.
A contract that companies are trying to conclude at the beginning of 2027 means a value of $ 320 per share for Norfolk or about $ 72 billion based on its own capital. This would be about 23% of the Norfolk Southern stocks before the first reports on the potential agreement this month.
Reaction to the stock market
Norfolk shares, which also showed quarterly results on Tuesday, dropped by 2.6% from 7:44 hours before regular trading in New York.
Union Pacific grew less than 1%. At the current level, companies would have a combined market value of about $ 200 billion.
Regulatory obstacles
Despite the advice of both companies, it approves the transaction, the agreement is facing a significant regulatory control, which is considered common in the merger of railways. Historically, the merger of railways was difficult due to the inhospitable regulatory environment.
The agreement will increase competitive pressure on the opponent, including BNSF CSX Corp. and Berkshire Hathaway Inc. to potentially follow their own agreements to keep the pace.
Companies announced that these are advanced interviews 24 July. This followed weeks of speculation that the railway industry was directed to the next round of consolidation, driven by the assumption that President Donald Trump’s administration could take a more accessible view to the main agreements than previous administrations.
The agreement is structured without voting trust and includes a $ 2.5 billion break fee in case it does not continue.
MEGA Deal Advisors
Bofa Securities serves as a financial advisor to Norfolk Southern, while Wachtell Lipton Rosen & Katz is a legal advisor, with Sidley Austin providing legal advice on regulatory matters.
Morgan Stanley & Co. And Wells Fargo serves as financial advisors to Union Pacific. Skadden Arps Slate Meagher & Flom serves as a legal advisor to Union Pacific, while Covington & Burling provides legal advice on regulatory matters.
Competition on the rise
Although the railroads transmit about 28% of all US expenses and 40% of the expense in the country, industry growth remained stagnating in the growing competition of transport.
Antimonopoly coercive staff of Trump’s administration must unsubscribe any combination in order to further concentrate the industry that was won on only six so -called freight railways of class 1.
The last big deal was concluded in 2023, when the Canadian Pacific was acquired by Kansas City Southern in a transaction worth about $ 31 billion.
The latest merger comes a year after the dramatic activist struggle in Norfolk Southern and the release of its former CEO.
(Tagstotranslate) Union Pacific (T) Norfolk Southern (T) Union Pacific Norfolk Southern Mushroom (T) Norfolk Southern Stock (T) Union Pacific and Norfolk Southern
