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Union Pacific closes deal to buy Norfolk Southern, Bloomberg reports

Bloomberg News, Friday's report, citing sources familiar with the situation, reported that Union Pacific, America's largest railroad operator, may reach an agreement early next week to buy rival Norfolk Southern.

Union Pacific announced on Thursday that it was in advanced discussions to acquire its competitor, signaling a possible deal to create a $200 billion coast to coast rail company. This could trigger further consolidation of remaining freight rail giants.

Union Pacific refused to comment while Norfolk Southern didn't immediately respond to an inquiry for comment.

The merger, which would represent the largest ever buyout of the sector, would

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The first modern single-line West-to East freight railroad in the United States has a significant impact on how goods are transported across the country, from grains to chemicals and autos.

Many in the rail industry, as well as Wall Street, were surprised that the talks have advanced. The U.S. freight railway system is already divided into two regional duopolies based on the point of origin.

The talks reveal how the thinking on antitrust issues changed under the Trump administration. His executive orders were aimed at removing barriers to competition and opening up the door for potential megamergers.

The deal, if completed, would combine Union Pacific’s dominant position in western two-thirds U.S. states with Norfolk Southern’s 19,500-miles network that spans 22 eastern states.

According to LSEG, Union Pacific has a value of approximately $138 billion. The company is struggling with low automotive volumes, volatile coal shipments and power producers switching to natural gas via pipeline.

Norfolk Southern is valued at $63 billion and is coming out of a turbulent time that saw the removal of its former CEO in the wake an ethics investigation, a high profile boardroom conflict with activist investor Ancora and a costly derailment train that cost the company $1.4 billion.

(source: Reuters)