Union Pacific Said To Be Snapping Up Norfolk Southern In Biggest US Railroad Deal Ever: Here's The Fine Print

Railroad operator Union Pacific (UNP) is reportedly close to acquiring Norfolk Southern (NSC) for $320 per share in a cash-and-stock deal, which would give its smaller rival a valuation of about $72 billion.

According to a Bloomberg News report, citing people familiar with the matter, the offer would consist of two-thirds stock and one-third cash. The price implies a premium of approximately 23% compared to the cost of Norfolk Southern shares prior to the first reports of the potential merger. The deal, if confirmed, would be the largest in the history of the U.S. railroads.

According to Monday’s closing price, Norfolk Southern had a market capitalization of $64.57 billion while Union Pacific was valued at close to $136 billion. Bloomberg had earlier reported that a deal could be announced as soon as this week. Norfolk Southern is scheduled to report its second–quarter earnings on Tuesday.

Retail sentiment on Stocktwits for Norfolk Southern was ‘bullish’, while traders were ‘extremely bullish’ about Union Pacific at the time of writing.

While merger talks between the two companies are reportedly at an advanced stage, the terms could still be subject to change. The companies had confirmed last week that they were discussing a potential merger to create a transcontinental railroad giant.

“This company is worth more than $320! I was thinking more like $450!” one retail trader said on Stocktwits, while another was satisfied with the offer.

https://stocktwits.com/kcphaeton/message/622799522  

The last major deal in the industry was the $29 billion merger between Canadian Pacific Railway and Kansas City Southern. While Trump’s White House has been friendlier to large mergers compared to the previous Biden administration, the sheer size of the company, as well as the involvement of unions, will likely raise questions about the future of the potential deal.

Norfolk Southern stock has gained 20.6% this year, while Union Pacific is down marginally.

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