U.S. Railroad Merger Review Paused
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Source: Newsfilter
- Merger Application Paused: The U.S. Surface Transportation Board has announced a pause in the review of the merger application between Union Pacific and Norfolk Southern, requesting additional information from the companies, indicating regulatory scrutiny over merger details.
- Stock Price Decline: Following the announcement, Union Pacific's shares fell 4.2% in morning trading, while Norfolk Southern's shares dropped 5.4%, reflecting market concerns regarding the merger's prospects.
- Application Clarity Issues: The STB noted that several aspects of the merger application are unclear or underdeveloped and require supplementation at this stage, highlighting the complexity of regulatory review and potential delays.
- Merger Context: The companies filed a revised application in April for their $85 billion merger aimed at creating a coast-to-coast freight rail operator after an initial proposal was rejected in January, showcasing the challenges faced in the merger process.
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Analyst Views on UNP
Wall Street analysts forecast UNP stock price to fall
15 Analyst Rating
9 Buy
6 Hold
0 Sell
Moderate Buy
Current: 267.000
Low
245.00
Averages
265.27
High
289.00
Current: 267.000
Low
245.00
Averages
265.27
High
289.00
About UNP
Union Pacific Corporation, through its principal operating company, Union Pacific Railroad Company, connects over 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. It maintains coordinated schedules with other rail carriers to move freight to and from the Atlantic Coast, the Pacific Coast, the Southeast, the Southwest, Canada, and Mexico. The railroad’s diversified business mix includes bulk, industrial, and premium. Its Bulk shipments consist of grain and grain products, fertilizer, food and refrigerated, and coal and renewables. The Industrial shipments consist of several categories, including construction, industrial chemicals, plastics, forest products, specialized products (primarily waste, salt, and roofing), metals and ores, petroleum, liquid petroleum gases (LPG), soda ash, and sand. Its Premium shipments include finished automobiles, automotive parts, and merchandise in intermodal containers.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Supplemental Information Request: The Board highlighted several unclear or underdeveloped aspects of the revised application, requesting additional details on competitive impacts, shipper access, and public benefits to ensure the merger aligns with public interest.
- Environmental Impact Statement: The Board confirmed that an Environmental Impact Statement will be prepared in accordance with the National Environmental Policy Act, planning to hold at least 12 in-person public meetings and several virtual sessions to gather public input during the environmental review process.
- Communication Waiver Denied: The Board denied the applicants' request to waive restrictions on ex parte communications, stating that such a waiver at this stage could complicate the record-building process, thereby affecting the transparency and fairness of the merger review.
See More
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- Information Gaps: The STB highlighted significant gaps in UP and NS's amended application, including unresolved competitive harms and inadequate market share analyses, failing to present effective measures to enhance competition, which reflects a lack of clarity and detail in their merger proposal.
- Competitive Risk Warning: The STB warned that the merger could reshape the American rail network, concentrating control over approximately 40% of U.S. freight rail traffic, posing significant downstream risks to supply chains, a concern echoed by CN.
- Insufficient Remedies: The remedies proposed by UP and NS are deemed narrow and temporary, unable to offset the competitive harms of the merger, particularly as their promoted pricing program applies to only a tiny fraction of rail traffic, potentially leaving many shippers facing higher shipping costs.
See More
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See More
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- Norfolk Southern Underperformance: Norfolk Southern's shares dropped by about 4.8%, making it the worst performer in the industry, suggesting potential operational or market challenges facing the company.
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See More
