From Lincoln’s dream to an $85 billion merger, the transcontinental railroad is back
Between 1863 and 1869, the first transcontinental line, known as the Pacific Railroad, was built in the United States. The line ran from Omaha, Nebraska, to Sacramento, California, and carried passengers and goods alike.
It was built mostly by the Central Pacific Railroad Company of California and Union Pacific, and marked a turning point in the Industrial Revolution and America’s economy when it came to shipping goods from the West Coast.
Now, Union Pacific is looking to expand upon history. Pending approval by the Surface Transportation Board (STB), it says it hopes to acquire Norfolk Southern through a “stock and cash transaction” by 2027, and create the “Union Pacific Transcontinental Railroad.”
According to a press release, this will involve Norfolk Southern shareholders receiving “one Union Pacific common share, and $88.82 in cash for each share of Norfolk Southern.” This will represent a $320 value per share, based on Union Pacific’s July 16, 2025, closing stock price. Ultimately, it will allow them to “buy” Norfolk Southern for $85 billion.
Norfolk Southern shareholders would represent 27% of ownership in the combined company. If the merger is not approved, the agreement reflects a $2.5 billion termination fee.
Their end goal is to connect the West and East coasts across 43 states and link around 100 shipment ports throughout North America.
They say it would be the first transcontinental railroad in America, but in reality, it would be the first line to carry freight (not passengers) without needing to transfer shipments between rail lines.
“This combination is transformational, enhancing the best freight transportation system in the world—it’s a win for the American economy, it’s a win for our customers, and it’s a win for our people,” Union Pacific CEO Jim Vena said in a statement. “It builds on President Abraham Lincoln’s vision of a transcontinental railroad from nearly 165 years ago and advances our Safety, Service, and Operational Excellence Strategy.”
Who does a transcontinental railroad benefit?
Currently, there are seven Class 1 freight railroads operating in the U.S.: BNSF Railway Co., Canadian National Railway (Grand Trunk Corporation), Canadian Pacific (Soo Line Corporation), CSX Transportation, Kansas City Southern Railway Co., Norfolk Southern, and Union Pacific Railroad.
Echoing the sentiment of the Trump administration’s “America First” strategy, the statement announcing the merger says this venture would “transform the U.S. supply chain, unleash the industrial strength of American manufacturing, and create new sources of economic growth and workforce opportunity that preserve union jobs.”
Additionally, Union Pacific claims the merging of routes would improve transit times, enhance rail competition—specifically against the Canadian lines that operate in the U.S.—and move more freight via train for a lower consumer and manufacturer cost.
The company cites the pros of rail shipping over highway truckers as “more cost effective on a per-ton mile basis, faster due to a lack of traffic concerns, and more environmentally fuel efficient.”
On the flip side, the cons of rail include that it’s less cost-efficient for smaller shipments, the shipping mode’s inability to reach specific locations all the time, and truckers are likely to have something to say about any transportation that moves from truck to rail.
Linking America’s coasts
According to the Federal Railroad Administration, 52% of rail freight consists of “bulk” commodities. These widely include agriculture, energy products, hazardous materials and chemicals, automobiles, food, and other various materials.
The other 48% consists of consumer goods and miscellaneous items like clothes, electronics, and produce—most of which are considered “intermodal,” meaning that they are small enough to be transferred for the “last mile” of shipment via plane, truck, or another transportation mode.
And per Union Pacific and Norfolk Southern, these goods equal around 1.5 billion tons currently moved via freight railroads every year.
What happens next?
The STB will review the agreement after the companies file their application to merge—something they say they plan to do within the next six months.
A merger of this capacity will likely raise questions regarding rail regulations and the ethics behind competition in America, as more and more freight rail mergers have taken place over the past few years.
As of this afternoon, both Norfolk Southern (NYSE: NSC) and Union Pacific (NYSE: UNP) shares are down nearly 3%.
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