BNSF hires Goldman, CSX seeks bankers as Union Pacific sparks rail M&A race, sources say
The moves by BNSF, owned by Warren Buffett's Berkshire Hathaway (BRKa.N), opens new tab
, and Jacksonville-based CSX come after Union Pacific (UNP.N), opens new tab began exploring a potential acquisition of Norfolk Southern (NSC.N), opens new tab, which could create a $200 billion coast-to-coast rail network and mark the most significant consolidation in the sector in decades.
Any potential deal is expected to undergo intense regulatory scrutiny and remains far from certain.
Goldman and CSX declined to comment. BNSF did not immediately respond to a Reuters request for comment.
Shares of Norfolk Southern were up 2.4% in extended trading.
Berkshire bought BNSF in 2010, paying $26.5 billion for the 77.4% of the railroad it didn't already own.
The last major rail merger occurred in 2023, when Canadian Pacific acquired Kansas City Southern, forming the first network to span Canada, the U.S. and Mexico. That deal followed a failed bid by Canadian National, underscoring how competitive pressures can quickly escalate in the sector.
In 2024, Union Pacific led the industry with $24.3 billion in revenue, followed by BNSF, CSX, Canadian National (CNR.TO), opens new tab Norfolk and Canadian Pacific Kansas City (CP.TO), opens new tab.
Talks between Union Pacific and Norfolk Southern are still in early stages, the people said. Any merger would require approval from the Surface Transportation Board, which could take up to two years.
CSX would be a better fit for Union Pacific than Norfolk Southern, said David O'Hara, managing director at MKP Advisors.
'With first-mover advantage, Union Pacific will buy whoever in the East wants to make themselves available," O'Hara said. "And whoever is left out in the cold ultimately will get bought by Burlington Northern - that will almost have to happen."
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Reuters
2 hours ago
- Reuters
Explainer: Union Pacific deal to buy US rail rival faces lengthy review
WASHINGTON, July 29 (Reuters) - Union Pacific's (UNP.N), opens new tabproposed purchase of smaller rival rail operator Norfolk Southern (NSC.N), opens new tab will need to be approved by the Surface Transportation Board in Washington, an independent federal agency that oversees competition and other areas of importance in the rail industry. The $85 billion deal announced on Tuesday would create the nation's first coast-to-coast freight rail operator and reshape the movement of goods from grains to autos across the U.S., which are issues of focus for the board. Below are details of the board and what it will examine for the Union Pacific deal. What is the Surface Transportation Board? Created in 1996, the agency reviews railroad mergers, rates, service issues and big construction projects. It replaced the Interstate Commerce Commission, which was established in 1887. STB chairman Patrick Fuchs has said he wants the agency to update the board's regulatory framework to improve competition and reduce regulatory barriers. The board rarely rejects mergers outright, but in 2021 it rejected Canadian National's ( opens new tab plan to place Kansas City Southern in a temporary "voting trust" that would have allowed Kansas City Southern shareholders to receive the deal's consideration without having to wait for full regulatory approval. That, and a higher bid from another Canadian railroad, helped end Canadian National's bid. What is the process for a railroad merger? Approval could easily take a year or more. Applicants first file a notice saying they intend to apply for a merger approval. The application for the merger is then filed three to six months after that. The STB then will decide if it is complete or not, before opening for public comments and responses for 90 days. It could then spend another year, hold a hearing, and get rebuttals and additional filings. Once the evidence is closed, the board will typically take another 90 days to issue a written opinion that generally includes an oversight period. The Attorney General also has authority to weigh in on large railroad mergers, giving the Justice Department a potential say in the merger. What does the board usually recommend for a rail merger? The STB's approval of the acquisition of Kansas City Southern Railway Company by Canadian Pacific Railway Limited came after a seven-day hearing and included an unprecedented seven-year oversight period and contained many conditions to address environmental impacts, preserve competition, protect railroad workers, and promote efficient passenger rail. What factors will the Board look at for the Union Pacific deal? The deal is the first to be considered under rules adopted in 2001 that will "substantially increase the burden on applicants to demonstrate that a proposed transaction would be in the public interest," and would require them to show how the deal will increase competition in key areas. The board will also look at how shippers of products view the deal and its impact on unions. The largest U.S. rail union, the International Association of Sheet Metal, Air, Rail and Transportation Workers, said it intends to oppose the Union Pacific deal in proceedings before the Surface Transportation Board on Tuesday. It fears the deal could reduce worker safety and job security, and downgrade service quality.
Reuters
3 hours ago
- Reuters
Union Pacific to reshape US freight rail with $85 billion deal for Norfolk
July 29 (Reuters) - Union Pacific (UNP.N), opens new tab said on Tuesday it would buy smaller rival Norfolk Southern (NSC.N), opens new tab in an $85 billion deal to create the first U.S. coast-to-coast freight rail operator and reshape the movement of goods from grains to autos across the country. If approved, the deal would be the largest ever buyout in the sector and combine Union Pacific's stronghold in the western two-thirds of the United States with Norfolk's 19,500-mile network that primarily spans 22 eastern states. The two railroads are expected to have a combined enterprise value of $250 billion and would unlock about $2.75 billion in annualized synergies, the companies said. The $320-per-share price implies a premium of 18.6% for Norfolk from its close on July 17, when reports of the merger first emerged. The companies said on Thursday they were in advanced discussions for a possible merger. The deal will face lengthy regulatory scrutiny amid union concerns over potential rate increases, service disruptions and job losses. The 1996 merger of Union Pacific and Southern Pacific had temporarily led to severe congestion and delays across the Southwest. The deal reflects a shift in antitrust enforcement under U.S. President Donald Trump's administration. Executive orders aimed at removing barriers to consolidation have opened the door to mergers that were previously considered unlikely. Surface Transportation Board Chairman Patrick Fuchs, appointed in January, has advocated for faster preliminary reviews and a more flexible approach to merger conditions. Even under an expedited process, the review could take from 19 to 22 months, according to a person involved in the discussions. Major railroad unions have long opposed consolidation, arguing that such mergers threaten jobs and risk disrupting rail service. "We will weigh in with the STB (regulator) and with the Trump administration in every way possible," said Jeremy Ferguson, president of the SMART-TD union's transport division, after the two companies said they were in advanced talks last week. "This merger is not good for labor, the rail shipper/customer or the public at large," he said. The SMART-TD union's transport division is North America's largest railroad operating union with more than 1,800 railroad yardmasters. The companies said they expect to file their application with the STB within six months. The North American rail industry has been grappling with volatile freight volumes, rising labor and fuel costs and growing pressure from shippers over service reliability, factors that could further complicate the merger. Union Pacific and Norfolk's shares were down about 3% each. The proposed deal had also prompted competitors BNSF, owned by Berkshire Hathaway (BRKa.N), opens new tab, and CSX (CSX.O), opens new tab, to explore merger options, people familiar with the matter said. The Union Pacific merger would create a railroad with the largest market share across most commodities, according to Jason Miller, interim chair of the department of supply-chain management at Michigan State University's business college. "I can't help but think this would create pressure for BNSF Railway and CSX to explore a merger possibility." Agents at the STB are already conducting preparatory work, anticipating they could soon receive not just one, but two megamerger proposals, a person close to the discussions told Reuters on Thursday. If both mergers are approved, the number of Class I railroads in North America would shrink to four from six, consolidating major freight routes and boosting pricing power for the industry. The Brotherhood of Railroad Signalmen raised concerns over safety, transparency, and employee treatment after the deal announcement, saying it would push for safeguards as regulators review the deal. The last major deal in the industry was the $31 billion merger of Canadian Pacific ( opens new tab and Kansas City Southern that created the first and only single-line rail network connecting Canada, the U.S. and Mexico. That deal, finalized in 2023, faced heavy regulatory resistance over fears it would curb competition, cut jobs and disrupt service, but was ultimately approved. Union Pacific is valued at nearly $136 billion, while Norfolk Southern has a market capitalization of about $65 billion, according to data from LSEG.
The Guardian
6 hours ago
- The Guardian
Union Pacific seeks to buy Norfolk Southern in $85bn merger deal
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