Union Pacific Chief Executive Jim Vena is confident that the Surface Transportation Board will accept the revised UP-Norfolk Southern merger application because it answers all of the questions regulators had about the initial filing that was deemed incomplete.
Among them: Providing the full merger agreement, including a section that outlines what board-ordered conditions might prompt UP (NYSE: UNP) to walk away from the $85 billion deal to acquire NS (NYSE: NSC)
Initially, UP thought gaining regulatory approval might require $750 million worth of concessions. But when the first application was nearing completion last fall, “we just couldn’t come up to that number anymore, and that’s why we said the concession number is way lower,” Vena told the Wolfe Research Global Transportation and Industrials Conference Thursday in New York. “Is it zero? No, it’s not,” Vena said. “But it’s not $750 million.” The merger agreement, however, lists a $750 million threshold that would trigger a review of whether the $85 billion deal would still make sense.
If push comes to shove, Vena says he’s not afraid to walk away from the merger. “This deal has to be better for the company, for Union Pacific, has to be able to grow the business, and has to be better for our investors,” Vena said. “If it isn’t, we’re pretty good as a standalone company, and I’m not worried about walking away from it.” Under the terms of the merger agreement, UP would abandon the deal if federal regulators order widespread trackage rights or line sales. The only exception: If the combined railroad is required to spin off one of its duplicative main lines between Kansas City and St. Louis.