Union Pacific is pressing regulators again for approval of its $85 billion plan to buy Norfolk Southern, filing a revised application with the U.S. Surface Transportation Board on Thursday after the board rejected its first attempt earlier this year. The Omaha, Nebraska-based railroad said it hopes the updated submission will address the board’s concerns about competition among the remaining major freight railroads and the effects on customers. The STB has 30 days to decide whether to accept the new application before beginning a more detailed review that the companies expect could last more than a year.
The dispute centers on how a consolidation of two large transcontinental rail networks would affect shippers and competition. In January, the STB rejected Union Pacific’s initial application as incomplete and asked for additional information, including details on the competitive balance among the five remaining major freight railroads and on impacts for customers. With Thursday’s filing, Union Pacific is seeking to clear that procedural hurdle and move into the substantive phase of review.
Union Pacific CEO Jim Vena said in remarks accompanying the filing that the new application makes a “stronger case” for benefits the company expects from the merger. He argued that the deal would reduce delays by eliminating the need for many shipments to be handed off between railroads in the middle of the country, and he projected that effect could shave a day or two off delivery time for many shipments. Vena also said the companies’ updated materials show potential for a large-scale shift in how freight moves across the U.S.
Union Pacific said the merger could lead to shifting 2.1 million truckloads off the highway onto trains, and that moving more freight by rail over longer distances would save shippers $3.5 billion. The company also said it expects the merger could improve competition over time by spurring operational improvements by other railroads. Vena said CSX and BNSF are already improving their operations to compete, and that shippers would benefit if the deal is approved. He also pointed to Berkshire Hathaway’s financial strength as ownership support for BNSF, saying Berkshire is “sitting on nearly $400 billion cash.”
In a quoted statement, Vena compared the years following approval to “one of those old 15-round boxing fights,” saying prices and service would be used and that he expects “the customer’s going to be the winner” while Union Pacific works to knock down rivals and grow its market share. The company’s view of the merger’s competitive impact is therefore tied both to a claimed service improvement and to the idea that other major railroads would respond to continued rivalry.
Railroad competitors and large shippers, however, have raised concerns that the merger could increase market power and allow freight rates to rise. Critics include major rail shippers such as chemical companies and agricultural groups, along with rival railroads, and they have argued that rates paid by existing customers could soar. BNSF and CPKC joined a new coalition Wednesday to highlight concerns that reduced competition could hurt shippers and eventually consumers by increasing costs for companies that have few alternatives to move raw materials and deliver products.
Katie Farmer, the CEO of BNSF, challenged Union Pacific’s framing directly, saying: “This did not begin with a customer asking for a UP-NS merger to happen. It’s driven by Wall Street on the promise of a big shareholder payout. It will eliminate competition, raise costs for consumers, and destabilize the supply chain that powers the American economy.” Her remarks reflect the core criticism that a merger reducing the number of major freight railroads could carry longer-term consequences for pricing and reliability.
Union Pacific said the board has set a high bar for major railroad mergers in the years after earlier combinations disrupted freight flows while networks were integrated. In response to that concern, Vena said the railroads would take the integration process slowly and would consult a new board of customers about the deal’s impacts. Union Pacific also said it views the merger as bringing together two successful railroads rather than repeating patterns from earlier deals in which one rail carrier had been in disrepair.
The filing includes deal terms aimed at reducing regulatory uncertainty, including a provision that would allow Union Pacific to consider walking away if the STB required more than $750 million in concessions. The railroads also disclosed a $2.5 billion breakup fee payable to Norfolk Southern if the deal falls apart. The companies’ application further lays out how the merger would reshape market positioning, with Union Pacific saying a merged system would likely control nearly 40% of the nation’s freight but that BNSF currently delivers that much of the nation’s freight, meaning the deal would shift which railroad dominates more of the market rather than dramatically change competitive balance.
Union Pacific also described workforce and operational commitments it says would accompany the merger. The company said it has promised that every union employee who has a job with either railroad at the time of the merger would have a job for life, while acknowledging that the workforce could still shrink through attrition if shipment volumes slow. Union Pacific predicted more than 1,200 new jobs by the third year after approval, building on a prior estimate of 900 new jobs and citing new traffic data analyzed by executives across the major freight railroads.
Finally, Union Pacific addressed competitor questions about its share of a key rail asset, the Terminal Railroad Association of St. Louis. Union Pacific said it will ensure the merged railroad never controls more than 50% of that terminal railroad, noting that Union Pacific currently owns nearly 43% and Norfolk Southern owns more than 14%. The filing also states that Union Pacific previously suggested temporarily becoming the majority owner during transition, but that it is now proposing the capped-control approach as part of the merger plan.