Union Pacific Corp (NYSE:UNP, ETR:UNP) and Norfolk Southern Corp (NYSE:NSC) have agreed to merge in an $85 billion cash-and-stock transaction that will create the first fully transcontinental railroad in the United States.
The deal, unanimously approved by both companies' boards of directors, is expected to close by early 2027, pending regulatory and shareholder approvals.
Under the terms of the deal, Norfolk Southern shareholders will receive $88.82 in cash and one share of Union Pacific stock for each share they own.
Based on Union Pacific’s stock price before the merger announcement, the offer values Norfolk Southern at approximately $320 per share, for a total enterprise value of $85 billion.
Union Pacific will issue approximately 225 million shares as part of the deal, giving Norfolk Southern shareholders a 27% stake in the combined company on a fully diluted basis.
The merged company will span approximately 50,000 route miles across 43 states and connect around 100 ports in North America.
The combined network aims to reduce transit times and improve service reliability by eliminating interchange points between the two railroads.
The companies expect the merger to generate about $2.75 billion in annualized synergies through operational efficiencies and expanded service offerings.
Based on 2024 results, the pro forma company would have had revenue of roughly $36 billion, EBITDA of about $18 billion, and free cash flow near $7 billion.
The deal is expected to be accretive to Union Pacific’s adjusted earnings per share starting in the second full year after closing.
Union Pacific CEO Jim Vena will lead the combined company, which will be headquartered in Omaha, Nebraska.
“This combination is transformational, enhancing the best freight transportation system in the world – it's a win for the American economy, it's a win for our customers, and it’s a win for our people,” Vena said.
Shares of Union Pacific fell 3.6% to $221 on the news, while Norfolk Southern stock was down 3.3% at $277.