Merger to create America’s first transcontinental railroad

While nobody enjoys getting stuck in front of a slow-moving freight train, the locomotive industry is about to deliver something that could actually streamline how goods move across America.

The biggest freight railroad in the country, Union Pacific, is purchasing fellow rail giant Norfolk Southern for $85 billion, the companies announced yesterday, forming America's first truly transcontinental railroad.

If the deal stays on the tracks

The tie-up is set to create a rail behemoth worth $200+ billion, which the companies say will:

• Make shipping goods between the East and West more efficient, since they wouldn’t have to be transferred between tracks run by different companies (the current practice).
• Produce billions in operational savings.
• Position rail as a viable cross-country shipping option to better compete with trucking.

But…The deal still requires regulatory approval. It’s also expected to face opposition from labor unions and companies that send their wares by rail, who are concerned that it would diminish competition and push up freight prices.

Looking ahead: If approved (likely a lengthy process), this megamerger could lead to further railroad consolidation. The Warren Buffett-owned BNSF, which operates tracks west of Chicago, and CSX, which dominates the Eastern US, are reportedly considering a merger in order to compete with a combined Union Pacific and Norfolk Southern.