OMAHA, Neb. — Union Pacific CEO Jim Vena and Norfolk Southern CEO Mark George first broached the possibility of a transcontinental merger during an otherwise routine phone call on Dec. 18, the railroads disclosed in a preliminary shareholder proxy filed on Tuesday.
The proxy form provides a detailed timeline for their merger discussions, including the haggling that led to the $85 billion deal that was announced on July 29. NS rejected UP’s initial June 20 offer valuing NS at $280 per share, then turned down a $310 follow-up. NS ultimately accepted UP’s $320 per-share bid — a 14% increase over the opener.
UP and NS also disclosed that potential concessions necessary for regulatory approval could reduce planned synergies by as much as $750 million, to a net of $2 billion.
The railroads have previously said they expect $2.75 billion in synergies, including $1 billion in cost savings and $1.75 billion in earnings before interest, taxes, depreciation, and amortization from revenue initiatives.
The $750 million concession-related haircut likely reflects a combination of potential traffic losses, pricing actions, and trackage rights remedies, Bascome Majors, an analyst with Susquehanna Financial Group, wrote in a note to clients.
UP did not expect to have to offer major concessions, such as selling off parts of its network, to enhance competition, Majors wrote, citing conversations with UP management.
UP and NS also said that in order to achieve the projected merger synergies they will have to spend $2 billion on capital expenditures in the first two years as a combined railroad.
Before shareholders can vote, the proxy must clear Securities and Exchange Commission review. The railroads said they anticipate holding shareholder meetings in late November or early December, timing that depends on the SEC process.
UP and NS considered each other their best merger partners and never entered into talks with other Class I railroads. After their initial Dec. 18 discussion, Vena and George informed their boards of the potential advantages of a transcontinental merger.
The two CEOs did not speak again until a March 18 meeting in Washington, when they were both in town for an Association of American Railroads meeting. Vena, in an April 1 phone call with George, suggested that they begin preliminary merger talks, which led to an initial meeting on May 15.
On June 27, the Norfolk Southern board and executive team weighed a standalone plan, the risk that UP might pursue another partner, and whether NS should consider a different merger candidate.
“The Norfolk Southern board also discussed industry trends and the difficulty Norfolk Southern and the industry has had, and risked continuing to have, in achieving significant growth on a standalone basis, including due to lower volumes because of truck market penetration, and the potential for a transcontinental merger to break through these challenges,” the preliminary proxy says.
UP held a similar session on July 1, where the board considered whether to continue talks with NS or consider another partner, which it identifies only as Party A. Presumably this is a reference to CSX, the only other railroad UP could acquire to form a U.S. transcontinental system.
On July 22, the CEO of Party A contacted Vena regarding a potential transaction. UP and NS signed an exclusivity agreement the following day and agreed not to speak to alternative rail partners. Party A’s chairman later called UP Chairman Michael R. McCarthy on July 27, two days before the UP-NS deal was announced.
Doubtful they’ve fully priced in the costs of integration nor priced out the value of cooperation without merger.
https://blerfblog.blogspot.com/2025/08/oh-boy-not-big-boy-just-oh-boy-up-wants.html?m=1
Not quite sure why this action is called a merger. It’s really not. UP is buying the NS outright and taking over their business as an extension of the Union Pacific. I would call this an acquisition. Under current “merger” rules, this combo seems unlikely. An examination of the operating chaos in past mergers, especially UP’s, shows that ops integration has unexpected challenges. Would this be different? Imagine the battles over reciprocal switching with other roads. By the time a merger could actually occur, operating integration of BNSF/CSX should be far ahead in providing smooth nation-wide operations.
You are right Roger, it is a purchase transaction, not a merger. But the rules are the same as if it were a merger, in the eyes of the STB, so that is just how it will be. There will be no such thing as a “merger of equals…” in the future because the facts are that UP and BNSF are individually larger than everybody else and have the financial capacity to buy whom they will. Just like an old SP head said when they were purchased by UP in 1996, ” Yeah, its a merger all right. They will use their first name (Union) and our last name (Pacific)…” CP didn’t even do that much, using their whole name and a city (Kansas City) for the last name, not even giving full credit to Kansas City Southern. But to the victor goes the spoils, I guess…
The Norfolk Southern board also discussed industry trends and the difficulty Norfolk Southern and the industry has had, and risked continuing to have, in achieving significant growth on a standalone basis…” The challenges in growth are largely due to how Class I’s run their railroads you dolts! Let’s see, there’s PSR, obsession with the OR, cutting service and raising rates, ignoring carload traffic, too few train crews…
No doubt multimillion dollar executive bonuses are contractually specified, whether approved or not. Industry concentration and PSR have not benefitteted the public, nor enhanced competition. Of course, regulation has been on a constant downhill slide since Staggers and the industry has been stagnant ever since.
The effect of Staggers was a no win scenario, a bail out of the industry before the weight of the collapse of Penn Central and the other bankrupt northeastern railroads doomed it. Congress has no choice, Let it die and eventually kill everything east of the Mississippi River of bail it out and save the best parts and make railroads able to make money again. The only thing they did wrong was not allowing Conrail to continue as a private corporation once it became profitable. That would have ensured real competition in the east and avoided the CSX/NS mess. But as they say, the road to hell is paved with good intentions…