The deal in one paragraph
In July 2025, Union Pacific, which runs freight railroads across the western US, agreed to buy Norfolk Southern, which runs the east. Together they would form the first coast-to-coast freight railroad in the US. The deal values Norfolk Southern at an enterprise value of about $85 billion and creates a combined business worth more than $250 billion.
How it is paid for
Norfolk Southern shareholders get one Union Pacific share plus $88.82 in cash for each share they own. Based on Union Pacific’s share price before the talks leaked, that is worth $320 a share. Union Pacific issues about 225 million new shares, so Norfolk Southern’s shareholders end up owning about 27% of the combined company. The cash comes from new debt and cash Union Pacific already holds.
Interview point: why mix cash and stock?
Paying partly in shares limits how much new debt Union Pacific needs, and keeps its investment-grade rating. Expected debt at closing is about 3.3 times EBITDA. It also lets Norfolk Southern shareholders share in the synergies, because they own part of the combined company.
The premium depends on what you compare it with
The companies described $320 as a 25% premium to Norfolk Southern’s 30-day volume-weighted average price before the talks became public. Against the share price on the day before the announcement, the premium was much smaller, because the shares had already jumped once the talks were reported.
This is why bankers talk about the unaffected share price: the price before any rumour. Always say which price a premium is measured against.
Why do it?
- Synergies. The companies expect about $2.75 billion of yearly savings and new revenue, mostly from running trains across the country without handing them over to another railroad halfway.
- Competing with trucks. Faster coast-to-coast service could win freight back from the roads.
- Scale. Based on 2024 results, the combined company would have about $36 billion of revenue and $18 billion of EBITDA.
The catch: regulators
US railroad mergers need approval from the Surface Transportation Board, which looks at whether a deal hurts competition and service. In August 2026 the board moved the deal to a full review of its merits. Comments on the revised application are due on 18 November 2026, with replies due in February 2027. To protect Norfolk Southern if the deal is blocked, Union Pacific agreed to pay a $2.5 billion reverse termination fee.
Try it yourself
Find Norfolk Southern’s EBITDA for the last full year in its annual report and work out the implied EV / EBITDA multiple at $85 billion. Then compare it with the multiple Union Pacific trades at. Is Union Pacific paying a lot or a little?
How to use it in an interview
If asked “tell me about a deal you’ve followed”, keep it to about a minute: who bought whom, the price and how it was paid for, the main reason, one risk (here, regulatory approval), and your view. For example: “I think the strategic logic is strong, but the regulatory risk is real, which is why the reverse termination fee is so large.”