(Reuters) -Railroad operator Union Pacific is exploring a deal to buy smaller rival Norfolk Southern, the Wall Street Journal reported, in a merger that would bolster the industry leader's heft and likely draw intense regulatory scrutiny.

Norfolk's shares rose 4.5% in extended trading on Thursday.

The talks were at an early stage and there was no guarantee they would result in any deal or get regulatory approval, the Journal said, citing people familiar with the matter.

Union Pacific declined a Reuters request for comment on the report, while Norfolk Southern did not immediately respond.

The potential acquisition would create a railroad giant with a combined market value of roughly $200 billion, further consolidating an industry that has already shrunk from dozens of major carriers to just a handful over the past several decades.

The news comes a day after Semafor reported Union Pacific was working with Morgan Stanley to explore an acquisition of a rival.

Reuters could not immediately confirm either reports.

With the acquisition, Union Pacific would gain access to Norfolk's 19,500-mile route that predominantly spans 22 eastern U.S. states, furthering its dominance by creating a coast-to-coast system.

A deal of this scale, however, would require approval from the Surface Transportation Board (STB), a regulatory body which oversees railroads. It would also need the support of worker unions that have historically been against industry consolidation due to concerns of job losses and service disruptions.

"The big real transactions inevitably draw close competition review," said William Kovacic, director of the competition law center at George Washington University, adding that the STB would be looking for the views of shippers and unions in any review. "This would attract a lot of scrutiny."

The STB had approved Canadian Pacific's $31 billion acquisition of Kansas City Southern in 2023 with multiple conditions and an unprecedented seven-year oversight period, marking the most stringent regulatory monitoring ever imposed on a major railroad merger.

The Union Pacific news also comes as Norfolk recovers from a tumultuous past couple of years that included the firing of its previous CEO due to ethics violations, a boardroom battle with activist Ancora, and a train derailment that cost the company about $1.4 billion.

(Reporting by Utkarsh Shetti in Bengaluru and Chris Sanders in Washington, additional reporting by Akash Sriram; Editing by Devika Syamnath)