News / Union Pacific to launch new bid for NS merger green light

Photo: © Dan Ross

Union Pacific CEO Jim Vena caught investors off-guard yesterday, announcing UP plans to resubmit its Norfolk Southern merger filing at the end of April, claiming US regulators had changed the requirements.

Having seen its initial application with the Surface Transportation Board (STB) rebuffed at the start of the year, on the grounds of missing information, the expectation had been that an amended application would be submitted at some point in March.

“Last week, [the STB] told us the way they wanted to see the information was different than we thought three weeks ago, after they’d sent it back to us to put more information in,” Mr Vena told attendees at the Barclays 43rd Annual Industrial Select Conference.

“By regulation, we had to give [the STB] an answer on 17 February, whether we’re going to reapply and when they could expect the application. So, we put out yesterday that it’s the end of April.”

The STB rejected UP’s initial application on three grounds: it did not detail UP obligations and its ability to cancel the deal; that it described associated acquisitions the STB considered “significant” as “minor”; and market share projections were absent.

The rejection came on the back of a series of separate, but broadly aligned, STB filings in January from rival railroads BNSF, CPKC), CN, and CSX urging the board to reject the merger filing on the basis it was incomplete.

Addressing that opposition, Mr Vena suggested there was no difference between UP’s proposed tie-up with Norfolk Southern than the merger that resulted in CPKC.

“Keith [Creel, CPKC CEO] is a real smart guy. I’ve known him a long time, and I give him accolades on what he’s been able to do. When he was putting together CPKC, he talked about single-line, seamless, better competition, and that was the story,” he said.

“And what we’re talking about is a seamless operation that enhances movement, and it gives customers better optionality.”

Mr Vena also sought to draw parallels between a UP-NS entity and BNSF, pointing out that the merged entity would control about 39% of US railroads’ gross tonnage miles, the same volume percentage BNSF handles.

UP CFO Jennifer Hamann told investors UP/NS would target growth by offering an alternative to road, saying: “75% of the business we’re expecting to grow is coming off the highway. It’s not coming from another railroad.”