When gold was discovered in California in 1848, it set off a rush to get to the state, but the only options were travelling by ship or wagon trains. It was not until 1869, the East and West coasts were linked by railway. Over the years through various consolidations and agreements, no single entity has controlled that coast to coast passage.

In an article by Josh Funk of the Associated Press, Union Pacific and Norfolk Southern Corp in a $85 billion deal want to change that. UP owns vast rail network in the west and NS is concentrated on the East Coast. UP is offering $20 billion in cash and one share of UP or $88.82 and a share which values NS at $320 a share.

Any deal would be closely scrutinized by antitrust regulators who had set a high bar after previous consolidations led to massive backups and snarled traffic. If the deal is approved, there would be pressure on BNSF and CSX to merge. BNSF has the ability to buy CSX.

The regulators of railways is called the US Surface Transportation Board and in the hearings, the big shippers have a say, but they all want something a little different. The chemical plants in the Gulf fear a monopoly or higher prices. Other big shippers such as Amazon and UPS might be in favor if the packages arrive more quickly and reliably.

The deal if approved will take 2 years of planning for a smooth integration or they are looking for 2027 approval.

In the early 1980’s there was 30 major freight companies, now there are 6 companies.

Linking to dividend paying stocks, one of the reasons for owning a railway is they are not making any railroads anymore. The size and shape of the country means the cost of using railroads over trucks will always exist, which means big shippers need the railways. As long as the economy is moving, the railroads will make a profit and pay dividends. The issue is how much of a profit.

There are more questions than answers, till the next time – to raising questions.