Union Pacific is working with Morgan Stanley investment bankers to provide guidance on the potential acquisition of another Class I railroad, the online publication Semafor reported on Wednesday, citing people familiar with the matter.
UP and Morgan Stanley declined to comment to the media outlet. CSX and Norfolk Southern stock prices surged on the news, while UP’s declined.
The Wall Street Journal has subsequently reported in a paywalled article that UP and Norfolk Southern are in the early stages of talks about a merger. There is no guarantee a deal will result, and another suitor could emerge, according to the Journal.
UP CEO Jim Vena has touted the potential benefits of a transcontinental merger while acknowledging the regulatory obstacles to any deal.
The Surface Transportation Board adopted more rigorous merger review rules in 2001 after rapid consolidation in the industry during the 1990s, including the Burlington Northern-Santa Fe and Union Pacific-Southern Pacific mergers as well as the CSX-Norfolk Southern deal to carve up Conrail.
The 2001 review rules — which require a merger to enhance competition and be in the public interest — remain untested. The 2023 merger of Canadian Pacific and Kansas City Southern was judged under the old merger rules thanks to an exemption that was granted to KCS, the smallest Class I, in the 2001 rules.
The STB is currently split along party lines, with two Republicans and two Democrats on the board. Analysts don’t expect a third Republican member to be nominated and confirmed before next year. And if two Class I railroads were to propose a merger, analysts say any deal would not be hatched until after a third Republican is seated on the board.
— Updated at 4:53 p.m. CT with Wall Street Journal report of merger talks.
In all fairness, I believe that the State of Alaska should have a say in all this by including the construction and completion of the Alaska to Alberta, Canada (A2A), and factoring that idea into any U.S. and Canadian, North American transcontinental merger plans.
Government should -but won’t- butt out. This isn’t the 19th century of “the public be damned” when it comes to railroads. Ever hear of trucks?
Gee Mr. Saunders, do I detect a faint hint of envy or jealousy here? The JBHT-BNSF intermodal deal, sometimes referred to as Quantum, is now the largest intermodal provider in North America by a very wide margin. And Quantum is the only intermodal carrier offering a 95% on-time guarantee.
The primary future growth area for freight railroads is clearly high-quality time sensitive intermodal not coal or grain.
Nope, just stating the perception. And perception is often reality no matter how much we want it not to be so. Having worked directly for Mr. Able within Warren Buffet’s global corporate world, I do know a thing or two about how Berkshire Hathaway operates and stability of customers is paramount. And JB Hunt is a huge customer, idiosyncrasies notwithstanding. You bleed orange and black, I bleed Armour Yellow and Red. But I am not afraid to criticize my favorites when I think it right or praise my “foes” when they are right. How about you? Pink glasses come in many different frames…
Most UP & NS lines don’t compete with each other. The requirement is that it increase competition, not just preserve it. This could potentially increase competition if UP/NS was willing to allow extensive trackage rights, reciprocal switching, and open access. But then will it still be worth doing?
One area where UP and NS do compete is in the Illinois and Missouri, on lines connecting Chicago, St Louis, and Kansas City. While the former Wabash could provide a great Chicago bypass for the merged carrier, who would UP/NS allow into these markets?
A long time ago, I read that UP, being larger than BNSF, interchanged more traffic with both NS and CSX than BNSF did. If this is still true, and if most NS traffic moves to UP, while most CSX traffic moves to BNSF, it will be a net loss of traffic for UP and a net gain for BNSF.
Finally, what is the effect on Iowa Interstate. NS currently uses them to access Des Moines, and perhaps other places. IAIS could lose this traffic to UP routes. What kind of protection could be put in place for them?
As I said elsewhere, “…extensive trackage rights, reciprocal switching, and open access…” are NOT GOING TO HAPPEN willingly by any Class One, unless forced to and the only force that great that I can think of of is nationalization. Fortunately we still promote capitalism in this country, despite its many faults, so nationalization is still along way off…
When have monopolies ever increased competition? An industry with 40% margins is an effective monopoly. The best thing that can happen from the greed of the industry executives and Wall Street masters is eventual nationalization.
Jim Vina needs to think about reality the Surface Transportation Board, Trump, and Secretary Duffy are going to say No.
You cannot force hostile takeover merger under the Stagger’s Act the only merger that is allowed is between a class two or a class three railroad with a class one. Class one to class one merger is not allowed if this proposal is sent to the STB Duffy is going to reject it so is Trump this is corporate greed and it is not allowed on America’s railroads under the American Association of Railroads or the Federal Railroad Administration. Sorry Jim Vina and I echo the words of Secretary Duffy the answer is No you cannot merge it is illegal.
As I said elsewhere, “…extensive trackage rights, reciprocal switching, and open access…” are NOT GOING TO HAPPEN willingly by any Class One, unless forced to and the only force that great that I can think of of is nationalization. Fortunately we still promote capitalism in this country, despite its many faults, so nationalization is still along way off…
And Aaron, it Vena, not Vina.
Classy? The only thing classy about UPRR is the heritage locos. I love that display of one diesel and one steamer high on an Omaha bluff, visible from WB I-80 crossing the Missouri River.
Other than the heritage locos, UP is nothing to be proud of. Never was a fan and never will be.
BNSF rocks.
Now you sound like Mr. Giblin… but that’s okay. Even a broken clock is right twice a day… LOL
UP’s 31-year-old classy GE AC4400CW loco radiates imposingly in David Lassen’s recent classy photo.
Dr. Güntürk Üstün
Wall Street Journal specfically states :”Norfolk Southern”
That’s right… Let’s remeber that the potential acquisition would create a railroad giant with a combined market value of roughly $200 billion, further consolidating an industry that has already shrunk from dozens of major carriers to just a handful over the past several decades. A deal of this scale would naturally require approval from the STB and it would need the support of worker unions as well.
Dr. Güntürk Üstün
Y’all will recall that we had a lot of fun with CP + KCS speculating on a merged corporate name. Here’s mine for the current prospect – “Union Pacific.” This is based on previous mergers with UP.
Rail North America for BNSF + CNR +CSX. (Not that I want it to happen.)
According to Warren Buffet’s Berkshire Hathaway, they have no interest in a Merger. They have enough trouble kowtowing to JB Hunt’s every whim…
” Here’s mine for the current prospect – “Union Pacific.” This is based on previous mergers with UP.”
As a past SPRR, and subsequently UPRR, telecom employee, I’ve heard that one before. Prior to the UP/SP merger, all my SP colleagues were speculating on a possible new corporate name, such as UP-SP. What finally transpired in sarcastic humor was that meant, “YoU People Start Packing”.
Former SP/DRGW CEO President Philip Anschutz had to finally intervene and defend his past SP employees, because of cultural and regional differences, to TPTB in Omaha, and internal employee relations finally improved somewhat.
Nothing wrong with talking about it.
But as I noted before, I don’t think they realize what the STB will want in return. They better be prepared to give up a lot, to get a lot.
Morgan Stanley will be focused on cutting yet more costs to generate more revenue. Not providing better service as part of it.
Why don’t we put this to a vote.
Forum members who support exploring transcon mergers vote “aye”.
Forum members who want to end the discussion here and now vote “nay”.
Aye. Why not? Should make for an interesting, extensive discussion. BTW, as of this moment, the market seems to be betting on NS, based on stock rise vs. CSX.
Nay…This coming from a UP man. The only thing a merger does for any combination is make the financial sector rich while everything continues to go to hell in a hand basket. I say more alliances like the UP/CN/ Ferromex Falcon Service but as I have said before:
“Mergers…we don’t need no stinking mergers…”
Nay. The benefits of mergers accrue to the suits and shareholders alone. The other stakeholders, the shippers, rail workers, and taxpayers gain nothing. The supposed efficiencies of consolidation are unlikely to benefit us all.
Nay ….. If the railroads were interested in serving the customers, they would have done it by now.
Maybe it’s a leap of judgment, but my gut feeling (FWIW) is that the merger talk of the last two weeks or so has come about because of a frustration with the status quo. Not that the mergers would solve anything, but no one else has come up with any answers.
The talk of the double-short haul, railroads not wanting to take a load from a bit west of the demarcation line (Chicago, KCMO) to a bit east of there, is hooey. If two railroads can’t cooperate to move freight from, say, Iowa to Indiana (the double short-haul) then a merger won’t change that.
NAY because based on the past, what could go wrong?
Nay, only Nay.
Nay. Everyone gets screwed except for laywers, consultants and stock market analysts.