The proposed $85 billion combination of Union Pacific and Norfolk Southern is encountering significant resistance on two separate fronts. Beyond internal delays in the formal application process, the railroad giant now faces an unusual regulatory challenge from its primary competitor, BNSF Railway. The central question for investors has shifted from whether the merger will proceed to what concessions might be required for regulatory approval.
Competitive Pressure Intensifies as Filing is Delayed
The formal review process for this historic rail merger has hit an unexpected snag. Union Pacific CEO Jim Vena confirmed this week that the submission of the extensive application dossier to the Surface Transportation Board (STB) will be delayed by approximately two weeks, pushing the filing date to mid-December. The holdup is attributed to a contractor requiring additional time to complete revisions on the thousand-page submission. This delay comes despite shareholders from both companies having already voted in favor of the transaction in November.
Simultaneously, competitive tensions have escalated. BNSF Railway lodged a formal petition with the STB in late November, launching a direct attack on the merger proposal. The rival carrier is urging regulators to immediately review and enforce conditions tied to Union Pacific’s last major acquisition—the 1996 purchase of Southern Pacific. BNSF alleges that Union Pacific has engaged in a long-term “strategy of obstruction” designed to stifle competition and disadvantage customers. Specific accusations include the use of delay tactics to block competitor access to shared customers and the imposition of unreasonable operational requirements.
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Union Pacific has firmly rejected these claims. In its defense, the company stated it has approved roughly 85 percent of the track access requests submitted by BNSF over the past 15 years.
Implications for the Merger Landscape
The potential creation of the nation’s first transcontinental railroad, with a combined network spanning 80,000 kilometers, would fundamentally reshape the industry. BNSF’s aggressive petition underscores the depth of competitive concerns surrounding the deal. By calling for an examination of compliance with past merger conditions before a new merger is considered, BNSF may be attempting to establish a critical precedent. Such a move could pave the way for more stringent oversight, additional concessions, or further delays in the current regulatory review. Market reaction to this dual-front pressure was muted in Friday’s trading session.
The coming weeks are pivotal. Once the application is finally submitted in mid-December, the STB will commence its formal, in-depth review. Regulators will now be compelled to evaluate the competitive landscape through the lens of BNSF’s allegations. For investors, the evolution of this two-pronged regulatory challenge remains the primary factor for assessing the merger’s ultimate fate and its impact on Union Pacific’s share valuation.
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