Norfolk Southern, Union Pacific ‘on track’ to refile for merger next week
Atlanta-based Norfolk Southern and its hopeful acquirer, Omaha-based Union Pacific, are set to refile their merger application to federal regulators by the end of April, executives told investors this week.
That’s despite “scare tactics” from the deal’s opponents, Norfolk Southern CEO Mark George told investors Friday. Among those protesting the deal are all of the railroad’s major competitors warning it consolidates nearly half the nation’s rail volume into the hands of one entity.
The proposed transaction would bring the two companies together as the nation’s first transcontinental railroad company based in Nebraska.
Executives say Atlanta would remain a major operations and tech hub for the combined railroad, but the city is set to lose a headquarters, and, according to the original application, more than half its Atlanta headcount if the deal goes through.
The companies announced plans last year for the biggest railroad tie-up in U.S. history, but their application was rejected by federal regulators as incomplete in January. Union Pacific and Norfolk Southern have remained undaunted.
The merger has become a common topic of discussion during the railroads’ quarterly earnings reports.
But on Friday the Atlanta railroad also highlighted a drop in its reportable accident rate and the potential “opportunities” the Iran war’s spike in fuel prices presents.
Even though Norfolk Southern had to pay 12% more for fuel in the quarter year-over-year, as the least energy-intensive mode of freight transport executives also see an opportunity in the global disruption when it comes to competing with trucking.
Chief Commercial Officer Ed Elkins also said they see “near-term opportunities” in hauling U.S. products like thermal natural gas and plastics that are now even more attractive in the global market.
Norfolk Southern reported $547 million in profit for the quarter — down 27% from last year’s $750 million. Railway operating revenues were roughly flat from last year at $3 billion in the quarter.
George said that the company’s 9% decline in international intermodal volume is rooted in last year’s tariff disruption.
“There’s been probably some inventory depletion that’s taken place, and it hasn’t seemed to really fully started to restock yet,” he said.
A key driver of the drop in net income was a drop in insurance payouts from the company’s 2023 train derailment in East Palestine, Ohio.
Whereas in the first quarter of last year they saw a net positive of $185 million from “recoveries” related to the incident, this year they saw $10 million in expenses.
In other “one-time” costs, Norfolk Southern spent $52 million in the first quarter on the merger, including employee retention agreements and legal fees, while Union Pacific reported about $36 million in similar expenses.
The fate of the deal will decided by the Surface Transportation Board, a federal panel responsible for the economic regulation of freight rail. After the two companies’ initial application was deemed incomplete, they promised to refile by April 30 with hopes to secure approval in 2027.
George said Friday the revised application will include “a much stronger set of data that actually makes the case even stronger.”
He said he feels even better about the fate of the deal than he did months ago.
Union Pacific’s CEO Jim Vena made a similar case to investors on Thursday.
“We are more convicted now than we ever have been when you take a look at what’s in the merger application,” he said.
Regulators said the first application was missing necessary information, including market share projections for the proposed new entity as well as the complete merger agreement document, which Vena said the companies would release.
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.
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