Union Pacific (UP) and Norfolk Southern's four Class I competitors urged US federal regulators to once again reject as incomplete the merger proposal to create the first US transcontinental railroad company.
UP and Norfolk Southern in December filed their original merger application with US rail regulator the Surface Transportation Board (STB), starting the clock on a multi-year process. It will be the largest merger the STB has ever scrutinized, and the process will likely feature high-profile hearings and congressional scrutiny.
The three-member STB in January ruled that the would-be partners' merger application was incomplete, sending it back to UP and Norfolk Southern to fill in key informational gaps. The railroads on 30 April refiled their proposal, which they say reinforces their argument the merger would drive growth, save shipping costs and bolster the US supply chain.
UP said its updated analysis shows the merger will shift freight shipments from the roads to the rails, saving shippers an estimated $3.5bn/yr and removing about 2.1mn trucks from the road.
However, all of the remaining Class I competitors heaped criticism on the merger application.
According to BNSF Railway, UP's western Class I competitor, "the amended merger application makes things worse, not better."
The refiled application "largely repackages" the first version while offering only "cosmetic changes to gloss over the serious and fundamental competition, pricing, and service concerns that were previously raised", BNSF said in an 8 May filing with the STB.
In its updated analysis, UP said the combined railroad will hold a 39pc market share of US rail freight market, which the railroad says would put it roughly on par with BNSF by certain metrics.
BNSF said that UP's actual market share would be considerably higher, a fact that it has downplayed in its application.
"UP continues to lowball its projected market shares to the board but signals to Wall Street — the engine behind this proposed merger — that the market shares and pricing power will be even higher," BNSF said, urging the STB to reject the application again as incomplete.
Canadian Class I railroads Canadian Pacific Kansas City and Canadian National both filed separate comments urging the STB to reject the application as incomplete, as did eastern US Class I railroad CSX.
In response to the filings, UP on 12 May said its updated application "is comprehensive and complete, and provides all the information" that the STB needs, including market share data.
The merger would create a single rail network stretching about 55,000 miles, handling about half of US freight traffic. UP and Norfolk Southern say that a coast-to-coast network will speed transit times by 24 to 48 hours and lead to greater efficiency. The two companies expect the transaction to be completed in the first half of 2027.
The UP-Norfolk Southern merger will be the first test of STB rules enacted in 2001 requiring Class I railroads to demonstrate that major mergers enhance, rather than merely preserve, competitive shipping options.
