Union Pacific CEO Jim Vena and Norfolk Southern CEO Mark George join CNBC's 'Squawk on the Street' to discuss Union Pacific's $85 billion deal to acquire Norfolk Southern, how the companies are thinking about regulatory risk, and much more.

Omaha

Union Pacific has revealed an agreement to acquire Norfolk Southern in a transaction valued at about $72 billion, combining cash and stock. This merger is set to establish the first transcontinental freight rail operator in the United States, marking the largest deal in the rail industry to date. 

Executives from both companies emphasized the benefits of the merger, including improved service for customers and enhanced operational efficiency. The companies have committed to retaining unionized jobs and are preparing for a detailed integration process while awaiting regulatory review and approval.

Union Pacific to acquire Norfolk Southern

So let's get some more about the huge deal of course of the morning, biggest in fact of all time Union Pacific announcing in the rail industry, Union Pacific announcing it will buy Norfolk Southern. It's a cash and stock deal worth about 72 billion dollars at present. It will create the first coast-to-coast freight operator in the country and as I said ranks as the number one deal the rail industry has seen in terms of its size. Joining us now in a first on CNBC interview is Union Pacific CEO Jim Venna and Norfolk Southern CEO Mark George to be interviewed by our Morgan Brennan. Morgan. Thank you and Jim and Mark it's great to have you on. Congratulations on the news today you just we just heard about it the fact that you've struck a deal here to create what is essentially the first ever transcontinental railroad in the U.S. Jim you're going to run the combined entity you're seen as the architect of this vision to create this transcontinental railroad. How did this come together? Why now? Well Morgan listen thank you very much and thanks for having Mark and I on with you this morning. We're excited and when you take a look at the way the U.S. railroad network is set up it's split from one side of the country to the other and we discussed it Mark and I and we had the thought at Union Pacific of how do we improve service for our customers? How do we give them a better product? How do we let them win in the marketplace? And this combination will do that. Is it great for America? It's great for America. We're going to be able to move products seamlessly whether it's products that are made in Arizona copper that's mine there or whether it's products east of Mississippi. So we're real excited and that's why we announced today after a few months of discussion and coming to a deal. Yeah you're targeting early 2027 to close this deal Mark. A lot has to happen between now and then. A deal doesn't use a voting trust. There's a reverse split fee. What do shareholders and other stakeholders need to understand about this deal especially as Norfolk Southern shares trade lower? Yeah look I think when when details are absorbed by the market they'll understand the value here that we're creating. I think we're both coming from a great position of strength right now. We're both operating exceptionally well. We've got great safety records. Our service records are really excellent. Our net promoter scores with our customers are great and independently we've got a great growth trajectory but together it's like a force multiplier. You know this is a one plus one equals three scenario and that's why when Jim started talking you know I he and I got together several months back and you know we talked about what can we do to to really create something bigger than what we are independently it became very very clear how big these revenue synergies are. So we're we're really excited about the future and again I think Morgan what's important to understand this is about the reindustrialization of America and how rail can play a huge part in facilitating the move of goods. And I do want to get into that a little bit more but first Jim historically consolidation in the rail industry especially if you look back to the 1990s it's been a tough sell. There's been concerns about reduced competition, service snarls, cost cuts, reduced workforce, impacts to safety. How do you counter all of that now? Well listen that's a long time ago and it's amazing how people look back 25 years ago and talk about it and those are lessons learned and but if you take a look at the way we're operating the railroad today we've made some major changes. We've changed out our base fundamental technology platform seamlessly at Union Pacific and we have a smart way to operate and we know that we can have a transition that we're going to work through in detail with Norfolk Southern that is not going to have the same issues that had before. We have guaranteed jobs for anybody that's unionized at Norfolk Southern and at Union Pacific because we're absolutely sure we're going to be growing our business. So we've done thought this through very carefully and we're prepared to move ahead in a very very logical manner. And we're going to spend two years now planning while this is under review. We're going to really start advanced planning on integration so that we can hit the ground running when it is approved and make sure that we don't have any level of disruption. So in light of that have regulators signaled an openness to you potentially doing this deal? How did you get comfortable with the regulatory risk and perhaps just as importantly how much hinges on this open seat at the Surface Transportation Board and what that nomination that nominee looks like? Well Morgan the way I look at it is this is we knew when we started to talk and when we decided to merge that we were going to have to go through a process with the Surface Transportation Board. We like what we've heard from the Surface Transportation Board and the new chair on how they want to follow strict rules about how we move decisions forward. So we're looking forward to it. We have a strong case. It's all about delivering for America. It's delivering for our customers having a better service product and absolutely making it so that they can move it at a very much better cost effective manner because of the amount of touch points we remove on rail cars. We're excited about it.

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