UP, Norfolk Southern announce plans to merge

Union Pacific announced plans Tuesday to combine with Norfolk Southern to form the country’s largest railroad.

Omaha-based UP said it will pay $320 per share for Norfolk Southern, valuing the deal at around $85 billion.

Combined, the two railroads would have a coast-to-coast network comprising more than 50,000 route miles across 43 states. At current share prices, the new company would be worth more than $250 billion, making it larger than BNSF Railways, which is owned by Omaha-based Berkshire Hathaway.

Omaha Mayor John Ewing Jr., in a statement praised UP's pledge to keep its headquarters in Omaha if the merger is successful.

"We would welcome any future employees from the combined railroads to settle in Omaha," he said.

The two companies just last week had confirmed they were in merger talks.

“Railroads have been an integral part of building America since the Industrial Revolution, and this transaction is the next step in advancing the industry,” Jim Vena, Union Pacific CEO, said in a news release.

“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 in the release.

It’s not clear if regulators will see the deal that way, however.

There are only six major freight railroads left after a wave of consolidation in the 1980s, and only one freight railroad merger has been approved in the past two decades.

Experts have said a merger between UP and Norfolk Southern is likely to receive heavy regulatory scrutiny, especially from the Surface Transportation Board.

Several unions that represent rail workers also expressed concern about what the merger will mean for jobs, worker rights and long-term industry stability.

The International Association of Machinists and Aerospace Workers Rail Division said in a statement it hopes terms of the merger "will value workers over the corporate bottom line."