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Union Pacific CEO Jim Vena said he\u2019s not interested in the federal government acquiring a stake in UP\u2019s massive, $71.5 billion acquisition of Norfolk Southern\u2014after President Trump expressed his interest to Fortune in owning a part of what could be the largest railroad merger\u2014but Vena also didn\u2019t definitively shut down the possibility.<\/p>\n
Speaking to CNBC on Thursday, Vena said he\u2019s complimented by Trump\u2019s interest, but that Union Pacific doesn\u2019t need any such federal support. Trump in May told Fortune that he wants a 15% federal stake in the large railroad merger\u2014although he didn\u2019t specifically name UP\u2014comments that came just days before a federal regulator put the mega deal on pause for additional review.<\/p>\n
\u201cWe\u2019re a company that can afford to make this deal,\u201d Vena said. \u201cWe\u2019re a company that can afford to handle what the price is for this deal, and we do not need anybody\u2019s help to do this.\u201d<\/p>\n
\u201cI find it comforting that the president of the United States looked at what we\u2019re doing and says, \u2018Son of a gun, this is a good business, a good business move, strong, and I\u2019d like to invest,\u2019\u201d Vena added. \u201cListen, I have not had any direct communication with the president of the United States to talk about the president and the government specifically coming in and being a partner in this.\u201d<\/p>\n
While Vena made it clear he considers federal intervention unnecessary, his remarks left open the potential to negotiate if the Trump administration presses the topic, possibly wanting to avoid antagonizing the president for now.<\/p>\n
After all, industry analysts have said this is a deal so large in an already consolidated industry (there are only four major railroads headquartered in the U.S.) that it likely would not have been proposed under any other recent presidential administration.<\/p>\n
There is no clear connection between the president\u2019s comments, made in a conversation with\u00a0Fortune last month, and the delay, announced by the regulatory body, the U.S. Surface Transportation Board (STB), on May 28. A pause is not unexpected for such a huge acquisition.<\/p>\n
At the same time, Trump\u2019s second term has been marked by unprecedented federal investments in publicly traded companies\u2014from Intel to rare earths miners and refiners\u2014all in industries deemed critical for national security.<\/p>\n
The proposed deal, which would be the biggest railroad merger ever, has inspired both political and industry opposition, driven by\u00a0fears that the expanded Union Pacific Transcontinental Railroad, as the new company would be called, would consolidate monopoly power in freight shipping and lead to higher prices for consumers and fewer railroad jobs.<\/p>\n
During a sit-down interview with\u00a0Fortune\u00a0on May 12, Trump said that he wanted the government to gain an ownership stake in a pending railroad merger.<\/p>\n
\u201cI got another one coming, a railroad,\u201d Trump said, of a deal that was currently in the works. \u201cThey want to expand. They want to merge, very big railroad, they want to merge. And I say, \u2018Well, I want 15% of the railroad if you\u2019re going to merge.\u2019\u201d<\/p>\n
The companies declined, Trump told\u00a0Fortune\u00a0editor-in-chief Alyson Shontell, but he argued they will reconsider. \u201cSo they said \u2018No,\u2019 but they\u2019ll say \u2018Yes.\u2019\u201d<\/p>\n
Trump then continued discussing his unique dealmaking record in his second term. \u201cI make one of those deals every day that no normal person would make,\u201d he said. \u201cThey actually say, \u2018It\u2019s very un-American.\u2019 I said, \u2018No, actually it\u2019s very American.\u2019\u201d Such moves are part\u00a0of a broader strategy of growing federal revenue and assets without raising income taxes that Trump and Secretary of Commerce Howard Lutnick have been pursuing.<\/p>\n
Like many large companies, Union Pacific is a corporate donor to Trump\u2019s ballroom project at the White House. UP also recently unveiled a commemorative locomotive for the nation\u2019s 250th anniversary.\u00a0The locomotive is No. 4547, representing Trump\u2019s status as the 45th and 47th U.S. president. Union Pacific has denied any connections between those actions and the pending acquisition. Last year, Trump spoke highly of UP and Vena.<\/p>\n
What comes next<\/p>\n
The Union Pacific-Norfolk Southern merger, which was first proposed last summer, is not facing an antitrust review under the purview of the Federal Trade Commission, as would be the case with most industries. Congress specifically exempted the freight railroad industry from FTC review, designating it to be regulated by the more specialized STB. While the FTC analyzes whether a merger lessens competition, the STB uses a broader \u201cpublic interest\u201d standard regulating \u201ccommon carriers\u201d in a concentrated but critically important industry.<\/p>\n
In January, the STB rejected the initial application for Omaha-based Union Pacific\u2019s $85 billion acquisition, including debt, of Atlanta-based Norfolk Southern in a cash-and-stock deal. The regulator said the application was incomplete and required a more thorough analysis on railroad congestion, the potential impact on commodities transported, pricing, and other factors.<\/p>\n
On May 28, the STB accepted the revised application, which formally allows the deal to continue the acquisition process. But it also said that even more review is needed, triggering the temporary pause.<\/p>\n
The STB said: \u201cThere are several aspects of the revised application that are unclear or underdeveloped and require supplementation at this stage of the proceeding so that the board may have the information necessary to thoroughly evaluate\u2014and the public has an adequate opportunity to comment on\u2014whether the transaction is in the public interest.\u201d<\/p>\n
\u201cIn a future decision, the board will establish an appropriate procedural schedule for the remainder of the proceeding,\u201d the STB added.<\/p>\n
The little-known STB has had only three board members of late. Trump appointed two of them\u2014chairman Patrick Fuchs and Michelle Schultz. The third, Karen Hedlund, served in the Obama administration and was appointed by former President Biden. A fourth, Republican Richard Kloster, was just confirmed by the Senate and is set to join the board.<\/p>\n
The federal government hasn\u2019t owned any freight railroads since the 1920s, with the exception of the Alaska Railroad, now owned by that state. The government does hold majority ownership of the passenger rail Amtrak network.<\/p>\n
The merger would create by far the largest railroad on the continent, with a combined enterprise value of $250 billion, 50,000 miles of rail across 43 states, and connections to roughly 100 ports and to \u201cnearly every corner of North America.\u201d Vena contends the merger would create a stronger alternative to long-haul trucking, removing more than 2 million truckloads from roads annually.<\/p>\n
Apart from several politicians publicly opposed to the consolidation, the Stop the Rail Merger Coalition, formed in late April, is also fighting the deal. Its members include Union Pacific\u2019s arch rival BNSF, Canadian Pacific Kansas City railroad, employee unions for both Union Pacific and Norfolk Southern, the Teamsters, and industry lobbying groups for the petrochemical and agriculture sectors.<\/p>\n
#Union #Pacific #CEO #Trump #wanting #stake #billion #merger #anybodys<\/p>\n","protected":false},"excerpt":{"rendered":"
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