Union Pacific Corp’s $84.4bn Acquisition of Norfolk Southern Corporation
- Feb 6
- 6 min read
Updated: 5 days ago
By Alp Ceylan, Elisa Nicoletti, and Victor Varela (Bocconi University); Alvaro Aguilar De Nalda (ESADE); Jiaqi Tang, Oli Greenhalgh and Ibrahim Demir (University of Birmingham)
Photo: Acton Crawford (Unsplash)
Overview of the deal
Acquirer: Union Pacific Corp
Target: Norfolk Southern Corp
Transaction Type: Stock-and-cash acquisition
Total Transaction Size: $84.4 billion
Closing Date: The first half of 2027 (subject to regulatory approval)
Target Advisor: BofA Securities (Financial); Wachtell, Lipton, Rosen & Katz; Sidley Austin LLP (Legal)
Acquirer Advisor: Morgan Stanley & Co. LLC; Wells Fargo & Company (Financial); Skadden, Arps, Slate, Meagher & Flom LLP (Corporate Counsel); Covington & Burling LLP (Transportation Counsel); Jones Day (Antitrust Counsel)
Union Pacific Corporation’s approximately $84–85 billion acquisition with Norfolk Southern Corporation represents one of the most significant consolidation transactions in U.S. transportation history, combining two Class I railroads to form the first fully integrated transcontinental rail network in the United States. The transaction does not involve taking Norfolk Southern private; instead, it results in a combined publicly listed rail operator with coast-to-coast reach.
The acquisition is structured as a strategic public-company combination and is expected to be financed through a mix of Union Pacific equity and assumed debt, consistent with an investment-grade-oriented capital structure rather than a leveraged buyout. Morgan Stanley and Wells Fargo are advising on financing and capital structure considerations. While integration costs may temporarily pressure credit metrics, the combined entity is expected to maintain balance-sheet flexibility appropriate for a capital-intensive rail business.
Union Pacific sees long-term value in integrating Norfolk Southern’s strong eastern rail franchise with its own western network, creating single-line service across key U.S. freight corridors. The combined platform is expected to enhance network efficiency, improve service reliability, and strengthen competitive positioning in high-growth intermodal and containerized freight markets.
For Norfolk Southern, participation in a larger transcontinental system provides scale advantages, enhanced investment capacity, and operational flexibility while retaining public-market discipline. The acquisition enables accelerated infrastructure investment, technology deployment, and network optimization that would be more difficult to achieve independently.
Company Details (Acquirer - Union Pacific Corporation)
Union Pacific Corporation is one of the largest Class I freight railroad operators in North America, providing rail transportation services across 23 U.S. states in the western two‑thirds of the country and connecting to Canada and Mexico through key gateway interchanges. The company moves a diversified mix of commodities, including agricultural products, automotive goods, chemicals, coal, industrial products, and intermodal containers across a rail network of roughly 32,000 route miles linking West Coast and Gulf Coast ports with major inland distribution hubs.
Founded: 1862
Headquartered: Omaha, Nebraska, USA
CEO: Jim Vena
Number of employees: ~32,400
Market Cap*: $160 billion USD
EV*: $162 billion USD
LTM Revenue*: $25 billion USD
LTM EBITDA*: $11 billion USD
LTM EV/Revenue: 6.5X
LTM EV/EBITDA: 14.5X
*As of 01/12/2025
Company Details (Target - Norfolk Southern Corporation)
Norfolk Southern Corporation is one of the largest Class I freight railroad operators in the United States, providing transportation services across 22 states and the District of Columbia. The company transports a diverse mix of commodities including intermodal containers, coal, automotive products, chemicals, and agricultural goods through its extensive rail network of approximately 19,300 route miles.
Founded: 1982 (through acquisition of Norfolk and Western Railway and Southern Railway)
Headquartered: Atlanta, Georgia, USA
CEO: Mark R. George
Number of employees: ~19,600
Market Cap*: $68.73 billion USD
EV*: $84.40 billion USD
LTM Revenue*: $12.23 billion USD
LTM EBITDA: $5.93 billion USD
LTM EV/Revenue: 6.90X
LTM EV/EBITDA: 14.23X
Recent Transactions: Acquisition of Cincinnati Southern Railway (January 2024 - lease renewal through 2051 for $1.6bn upfront payment), strategic partnership with Canadian National Railway for enhanced intermodal services (2023), infrastructure investments in Heartland Corridor and Crescent Corridor expansion projects (ongoing through 2025).
*As of 18/11/2025
Projections and Assumptions
Short-Term Consequences
Following the announcement of the Norfolk Southern Corp (NSC)–Union Pacific Corp (UNP) acquisition, the combined entity is expected to experience several short-term impacts shaped by regulatory scrutiny, operational adjustments, and market reactions. The most immediate consequence is heightened uncertainty, as the U.S. Surface Transportation Board (STB), with input from antitrust authorities like the Department of Justice (DOJ), begin reviewing the transaction. This regulatory process may lead to delays in the acquisition timeline, compel both companies to pause or revise capital expenditure plans, and generate ambiguity for shippers regarding future service structures.
Financial markets are likely to respond with near-term volatility, reflecting investor concerns over integration risks and one-time transaction costs. Advisory fees, preparatory IT investments, and restructuring charges could weigh on quarterly earnings, resulting in temporary margin compression. At the operational level, management attention may shift toward regulatory engagement and integration planning, creating short-lived inefficiencies across network coordination and internal decision-making processes.
Customers may also face service and pricing uncertainty, prompting some shippers—particularly in intermodal and bulk freight—to explore alternative routing options or renegotiate contracts. Meanwhile, competitors such as BNSF in the western U.S. and CSX in the eastern U.S. may adopt defensive strategies, including targeted pricing incentives or service enhancements, to retain market share.
Long-Term Upsides
Overall, the $1.6 billion acquisition of Cincinnati Southern Railway grants Norfolk Southern Corporation control of a critical freight network through 2051. Cincinnati Southern Railway comprises 337 miles of track connecting Cincinnati, Ohio to Chattanooga, and this expanded footprint is expected to complement existing Norfolk Southern freight operations such as the Heartland Corridor and the Crescent Corridor. As a result, capacity utilization and operational efficiency are likely to improve, which could enhance EBITDA margins and reduce per-mile transportation costs over time.
However, in the short to mid-term, free cash flow may remain under pressure due to ongoing infrastructure investments, upfront capital expenditures, and the costs associated with harmonizing the newly integrated networks. These integration-related expenses are expected to precede the realization of operational and financial efficiency gains.
From a market perspective, the U.S. freight industry shows moderate but steady long-term growth prospects, with volumes expected to increase by roughly 50% between 2020 and 2025. In addition, the strategic partnership initiated with Canadian National Railway in 2023 connects major Canadian cities with key U.S. hubs such as Kansas City and Atlanta, unlocking access to a cross-border trade market exceeding $700 billion annually, with potential future expansion toward Mexico.
From an operational and sustainability standpoint, rail transportation remains one of the lowest carbon-emission modes of freight transport, often cited as producing up to approximately 75% lower greenhouse gas emissions per ton-mile compared to trucking. This positions Norfolk Southern favorably within ESG-oriented investment frameworks, and the increased scale resulting from the acquisition further strengthens this profile.
Moreover, the integration of Cincinnati Southern Railway expands Norfolk Southern’s network while reducing the need for costly rerouting and duplication of track usage. Over time, continued partnership expansion with Canadian National Railway is expected to support sustained EBITDA growth and reinforce Norfolk Southern’s competitive positioning relative to other Class I railroads.
Risks and Uncertainties
While the proposed acquisition between Norfolk Southern Corporation and Union Pacific Corporation is positioned as a landmark transaction that would create the first fully integrated transcontinental railroad in the United States, the deal is subject to a range of material risks and uncertainties that could affect its successful completion and long-term value creation.
A primary source of uncertainty relates to regulatory and antitrust approval. The transaction requires authorization from the U.S. Surface Transportation Board (STB), which applies a strict public-interest standard to large rail acquisitions. Given the scale of the combined network and its potential impact on competition, the approval process is expected to be lengthy and complex, with no certainty that the acquisition will be approved without conditions or delays.
Closely linked to this is the risk of heightened antitrust scrutiny. The acquisition would further consolidate the U.S. freight rail industry, raising concerns among regulators, shippers, and policymakers regarding reduced competition, potential pricing power, and limited transportation alternatives for customers. Any remedies imposed by regulators could dilute the anticipated strategic and financial benefits of the transaction.
The deal has also faced opposition from labor unions, shipper groups, and public stakeholders, who have expressed concerns related to safety, service reliability, workforce implications, and infrastructure concentration. Sustained resistance from these groups could influence regulatory outcomes or increase political pressure on oversight bodies.
From an operational perspective, the acquisition presents significant integration risks. Combining two large and complex rail networks requires the alignment of operating systems, technologies, safety standards, and corporate cultures. Failure to execute this integration effectively could lead to service disruptions, higher costs, and reputational damage.
There are also financial and execution risks associated with the transaction. The acquisition is predicated on the realization of substantial cost synergies and efficiency gains over time. If integration costs exceed expectations or projected synergies fail to materialize, the economic rationale of the deal could weaken. Additionally, the presence of termination fees underscores the financial exposure should the transaction fail to close.
Finally, industry and competitive dynamics introduce further uncertainty. Rival rail operators may respond strategically to the acquisition, potentially reshaping competitive conditions in ways that reduce the long-term advantages anticipated by the combined entity.
“The approval of our shareholders marks a key milestone in our journey to create America’s first coast-to-coast transcontinental railroad, combining complementary networks and capabilities to unlock a multiplier effect for benefits to all stakeholders,” - Mark George, President and CEO of Norfolk Southern.