Union Pacific and Norfolk Southerns Southerns announced their proposed integration as a way to return volume after losing market share to trucks since the peak of rail traffic in 2006.
“We can only move independently,” said Mark George, chief executive of NS this morning. And let’s face it, the industry has been in the past few decades in terms of volume growth. ” “We have lost the share of the truck – and this is one of the inverse ways of this process.”
This historic compound-which creates the first intercontinental rail in the United States-eliminates growth, speed and simplification of services, and enables the railroad to hit the so-called watershed markets along the Mississippi River. UP and NS predict their integration of $ 1.75 billion in growth by the third year.
UP (NYSE: Unp) and NS (NYSE: NSC) are currently exchanging about 1 million shipments per year and are the largest replacement partners in each other. Single -line service reduces pressure at gates such as Chicago and Memphis, ending that inefficient and inefficient tire replacements allow customers to receive a quotation from a railroad instead of two.
“In the future, these millions will be seeing a 24 to 48 -hour improvement at their transit,” Vena said. “This is a combination of faster services and more access to the powerful market, and the intercontinental rail makes us an attractive choice for current and future customers.”
Intercontinental traffic opportunities include integrated services from the beach to the beach – and most of the locations in the middle – finished vehicles, food and drinks, chemicals and steel cargo.
For freight and loading, this integration in the middle part of the country, which is currently not used by railways due to short transportation for the eastern or western carrier or both.
“With our replacement with UP today, 95 % of our exchange is more than 2000 miles, meaning that only 5 % under 2,000 miles, we see a huge opportunity to grow on the lines where we will be 1000 miles or 1500 miles,” George said of Intermodal. “So this is just one instance, and that kind of touch to the whole watershed story.”
The railway in short -term movements in the watershed, a supervised area from Wisconsin and Minnesota to East Texas, Louisiana and Mississippi, are not competitive.
“When you move from the west to the east or east to the west, the rail is not even considered because it is just too much trouble, too long, explicit and too much,” George said. “So these are the areas where we see tremendous growth.”
Single-line services on a watershed on an up-NS hybrid system enables the rail to compete for example to move in traffic between Houston and Charlotte, NC and Dallas and Columbus, Ohio.
“There is a lot of opportunity here that there is almost no rail movement,” George said.
The integration also allows the rail to eliminate the middle handles for the load.
“We will remove the touchpoints, and every time there is a touchpoint, you will add 24 to 36 hours at best, while you change the rail machine,” Vena said. “After all, at the points of replacement, where we were stopped and touched, this is being removed. So every customer who today is finally approved … we want to cut off one or two days from any time.”
According to him, this will reduce costs for customers, which can reduce the size of their car fleet due to faster cycle time. It will also mean a more fluid rail.
For the new trains, Chicago only becomes one of the crew changing points on the map. But Vena says it is unlikely that there will be widespread fluctuations away from Chicago, an chronic stranglent point where 25 % of rail traffic originates or passes.
“We don’t see a lot of business from Chicago to go to Memphis or go to New Orleans because the miles are not just added,” Vena said.
Vena said The TransContinental UP will also be able to return international traffic, which has left the US ports for the past two decades in Vancouver and Prince Rupert, British Colombia.
The process of approval
Managers also stated that their transaction could obtain supervisory approval. The UP-NS combination will be the first of the 2001 level transportation mergers. These rules for promoting competition – not just keep it – and are in the public interest.
Vena said if the STB systematically checks the transaction while asking if the inter -continental rail is better for customers and the country, they will confirm it. “We are very confident about this, or we are not walking,” he said.
Currently, only 20 customers are jointly served by UP and NS, whose networks overlap in the western middle. “We intend to provide a competitive alternative,” Vena said.
The rail also structured its transaction without using voting trust. Railway integration typically includes railway to maintain rail independence and allow their shareholders to allow their shareholders to allow their shareholders to allow their shareholders.
In 2021, STB rejected the national Canadian request (NYSE: CNI) to put Kansas City in a voting confidence and said it was not in the public interest. The decision created the proposed integration of CN -KCS and led to the Canadian Pacific Ocean composition (NYSE: CP) -KCS, which was judged under the rules of less limiting integration review due to exemption granted to KCS, so far the lowest railroad I.
UP and NS do not take advantage of this opportunity.
“We really believe that voting confidence complicates and delays the transaction,” said Jennifer Hamman. “So we want to go to STB with a fully developed integration program that allows us to really state the principles of this integration and provide all the details that support our position that this not only increases competition but is completely in the public interest.”
In addition, without voting confidence, it does not have to fund the transaction until it is confirmed, which is estimated to be based on Stb’s legal guidelines for 2027.
Smooth integration promises
The integration of the railway in the modern era has a common thing: the problems of services that occur when using operational systems and information technology systems.
UP Operational Decisions in Houston after reaching 1996 in the South Pacific in 1997 and 1998 caused extensive traffic. In the case of its heels, information technology problems led to urgent services problems in South Norfolk after the Poilil Division with CSX (NASDAQ: CSX), which later faced its service problems.
Vena said, “The transaction is not made of this size and domain easily. We understand this.”
He said the railway will maintain sufficient reserves of locomotives, train crews and other resources to respond better and improve service issues.
“We are very aware of what led to the mergers’ deadlines over 2000, 2001, and that was just a bunch of bad merits,” George said. “And we are committed to making sure that it doesn’t happen in this case.”
George said the two -year review process provides sufficient time for planning, especially for information technology systems.
CPKC problematic computers in the former KCS territory in the United States last May produce overcrowded switches and delay that CPKC is now mainly destroyed.
Last year, UP had a smooth cut into its new NetControl computer system that processs everything from rail and programming to Waybill processing and training, locomotive and terminal management. “It was a non -event event,” Vena said. “It was like that no one knew it really happened.”
Most of the $ 2 billion railroad is allocated to raise capital costs towards information technology investments.
Synergism of $ 2.75 billion
Assuming the shareholders approve the transaction, it earns up NS in a stock and cash transaction that earns $ 320 per share, 25 % of the premium. The company will be worth more than $ 250 billion. The merger creates $ 2.75 billion annually, between $ 1.75 billion in revenue and $ 1 billion in cost and productivity savings, the railroad said.
UP provides $ 20 billion of this transaction through a combination of cash in hand and new debt. Both railroads stop repayment plans by 2028 but maintain dividend payment.
The carrier’s opposition and labor
The railroad committed to maintaining union jobs, which are the overwhelming majority of the 52,000 -strong composite system.
“All our union employees who have a job today will have a job in our integration company tomorrow,” Vena said. “And the company that is growing business and provoking economic development also creates more jobs.”
However, the Smart-TD Union, which represents the conductor, said it was against mergers.
Yesterday, transportation associations told trains that they oppose further integration into the railway industry.
How will the railway take over rail transport protests?
“We make them one by one, but I think they can see their benefits when people start understanding what we are doing,” George said.
He said this is especially true of the labor force because the company adds jobs with increasing new traffic.
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