10:44 AM EDT, 07/29/2025 (MT Newswires) -- Union Pacific ( UNP ) on Tuesday agreed to acquire Norfolk Southern ( NSC ) in a cash-and-stock deal valuing the smaller railroad operator at about $85 billion, forming a rail giant linking the East and West Coasts.

Shareholders of Norfolk will receive one share of Union Pacific ( UNP ) and $88.82 in cash for each share they own in the company, the firms said in a joint statement. The offer reflects a value of $320 per share for Norfolk, representing a 25% premium to its 30-day volume-weighted average price as of July 16.

The companies confirmed last week that they were in "advanced" talks about possibly combining their operations. Shares of Union Pacific ( UNP ) declined 2.4% in Tuesday trade, while Norfolk fell 3.1%.

"This transaction is the next step in advancing the industry," Union Pacific ( UNP ) Chief Executive Jim Vena said in the statement. "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."

The companies are seeking to connect more than 50,000 route miles across 43 states from the East Coast to the West Coast and link roughly 100 ports. The combined enterprise is forecast to have pro-forma revenue of about $36 billion, based on last year's results, the companies said. The combined company is expected to have an enterprise value of over $250 billion, according to the statement.

Union Pacific ( UNP ) plans to issue around 225 million shares to Norfolk's investors, representing a 27% stake in the combined company. Union Pacific ( UNP ) estimates the deal to be accretive to its adjusted earnings on a per-share basis in the second full year after completion, with high-single-digit accretion thereafter.

The transaction is expected to transform the supply chain in the US, boost domestic manufacturing, create new work opportunities and preserve union jobs, according to the companies. Shareholders of both companies are expected to realize more than $30 billion of potential value creation through the projected achievement of roughly $2.75 billion in annualized synergies.

The companies are aiming to complete the transaction by early 2027, following approval from the Surface Transportation Board, as well as clearance from stockholders. The deal includes a $2.5 billion reverse termination fee.

The combined company, which will be led by Vena as CEO, will be headquartered in Omaha, Nebraska. Atlanta, Georgia, will remain a core location for the combined organization over the long term, the companies added.

"We are confident that the power of Norfolk Southern's ( NSC ) franchise, diversified solutions, high-quality customers and partners, as well as skilled employees, will contribute meaningfully to America's first transcontinental railroad," Norfolk CEO Mark George said. "Union Pacific ( UNP ) is a true partner that shares our belief in rail's ability to deliver for all stakeholders simultaneously."

In a separate statement, Norfolk said it reported second-quarter adjusted EPS of $3.29, up from $3.06 the year before, but below the FactSet-polled consensus of $3.31. Revenue increased to $3.11 billion from $3.04 billion, but fell short of the Street's view for $3.13 billion. The company said it expects revenue to grow between 2% and 3% in 2025.

Last week, Union Pacific ( UNP ) posted EPS of $3.03 for the second quarter, up from $2.74 a year earlier, while operating revenue grew 2% to $6.15 billion.

Price: 223.55, Change: -5.70, Percent Change: -2.48