Union Pacific, Norfolk Southern to file merger application by Dec. 1
Executives at Norfolk Southern and Union Pacific trumpeted their enthusiasm about their proposed merger — and an ambitious timeline to turn in their hefty application to federal regulators in a matter of weeks.
Speaking to investors Thursday morning, Union Pacific CEO Jim Vena said he’s pushing to file the application to the Surface Transportation Board “before the first of December.”
“If you talk to some people on the team, they’re saying, ‘Geez, Jim Vena, would you give us a little bit of time?’ And the answer is no,” he said.
“I’m hoping that we can do everything we can to have it in by the end of November, or the latest in early December.”
The Omaha-based railroad plans to acquire Atlanta’s Norfolk Southern for $85 billion in a transaction that, if approved by federal regulators, would create the country’s first transcontinental railroad company and cost Atlanta a corporate headquarters.
The two railroads reported year-over-year revenue growth for the quarter ending in September, though Norfolk Southern’s fell short of its goal. CEO Mark George told investors Thursday afternoon that it was because of “revenue erosion from competitor reactions to the merger announcement.”
Union Pacific and Norfolk Southern responded with their own joint domestic intermodal service in September, but it only went into effect this month and some revenue damage appears to already have been done.
George said the company expects “the impact to grow in the fourth quarter and continue to be a challenge over the near and medium term.”
Vena addressed the situation in the Union Pacific call as well. “I truly am surprised that it took us announcing a merger for other people to say that they were going to do special moves and cooperate,” he said.
Norfolk Southern reported $711 million in profit for the quarter; Union Pacific — which has more than double the market value — reported $1.8 billion.
And when answering questions from investors, both continued to make the case that together they could be even stronger.
“Once the merger closes, we can provide attractive solutions for our customers, unlocking faster, more reliable service, streamline shipping experiences and expanded access across a unified coast to coast rail network,” George said.
Next year Union Pacific has “an opportunity to put together a franchise with the great team over at Norfolk Southern,” Vena said.
“They know what they have to do to generate cash and be able to run a really good railroad, so that we can show everybody what the combined railroad is going to look like to win.”
George told investors that both companies need to go into the transaction “operating well” in order to “ensure a good foundation for integration.”
On Nov. 14 both companies will hold simultaneous shareholder votes to approve the deal.
The White House earlier this year fired the board’s lone opponent to the last railroad merger, Robert Primus. He has sued the administration over the termination he alleges was illegal.
Vena said he believes the STB will “end up at the right place … because they’re smart, and they’re going to go work through the issues that are on the table.”
And he said he’s hoping for that approval by mid-next year.
“I know our chief legal officer is looking at me sideways right now when I said mid-next year,” he told investors.
“So that’s my dream. But it could be a little later.”
About the Author
As a business reporter, Emma Hurt leads coverage of the Atlanta airport, Delta Air Lines, UPS, Norfolk Southern and other travel and logistics companies. Prior to the Atlanta Journal-Constitution she worked as an editor and Atlanta reporter for Axios, a politics reporter for WABE News and a business reporter for the Arkansas Democrat-Gazette.
