UP CEO confident rail merger application checks all the STB’s boxes

Union Pacific Chief Executive Jim Vena is assured that the Surface Transportation Board volition judge the revised UP-Norfolk Southern merger exertion due to the fact that it answers each of the questions regulators had astir the archetypal filing that was deemed incomplete.

Among them: Providing the afloat merger agreement, including a conception that outlines what board-ordered conditions mightiness punctual UP (NYSE: UNP) to locomotion distant from the $85 cardinal woody to get NS (NYSE: NSC).

Initially, UP thought gaining regulatory support mightiness necessitate $750 cardinal worthy of concessions. But erstwhile the archetypal exertion was nearing completion past fall, “we conscionable couldn’t travel up to that fig anymore, and that’s wherefore we said the concession fig is mode lower,” Vena told the Wolfe Research Global Transportation and Industrials Conference Thursday successful New York.

“Is it zero? No, it’s not,” Vena said. “But it’s not $750 million.”

The merger agreement, however, lists a $750 cardinal threshold that would trigger a reappraisal of whether the $85 cardinal woody would inactive marque sense.

If propulsion comes to shove, Vena says he’s not acrophobic to locomotion distant from the merger.

“This woody has to beryllium amended for the company, for Union Pacific, has to beryllium capable to turn the business, and has to beryllium amended for our investors,” Vena said. “If it isn’t, we’re beauteous bully arsenic a standalone company, and I’m not disquieted astir walking distant from it.”

Under the presumption of the merger agreement, UP would wantonness the woody if national regulators bid wide trackage rights oregon enactment sales. The lone exception: If the combined railroad is required to rotation disconnected 1 of its duplicative main lines betwixt Kansas City and St. Louis. If the merger is approved, UP would person a brace of K.C.-St. Louis routes, including the erstwhile Missouri Pacific via Jefferson City, Mo., and NS’ erstwhile Wabash via Moberly, Mo.

“We’ll enactment done the process, and we’re talking to a fig of radical to beryllium capable to get that done,” Vena said of the imaginable divestiture of a K.C.-St. Louis route. “But those things are complicated. It takes a portion to get them done.”

In caller past since the 1990s, shows that the STB has not rejected a merger exertion twice.

The revised exertion besides addresses however UP would guarantee that it does not summation power of the Terminal Railroad Association of St. Louis, which is owned by UP, NS, BNSF (NYSE: BRK-B), Canadian National (NYSE: CNI), and CSX (NASDAQ: CSX).

The different Class I’s person criticized UP for not specifically spelling retired however it would divest a information of its ownership.

BNSF, CSX, and CN each argued that the revised exertion is incomplete due to the fact that it does not see an exertion for power of the TRRA. The UP-NS effect is that, dissimilar the archetypal application, the revised mentation does not marque divestiture of the NS stock of the TRRA contingent connected the different owners’ willingness to wage just marketplace value. Instead, the caller exertion asks the committee to marque divestiture a information of merger approval, “thereby ensuring the Applicants could not get power of TRRA, adjacent temporarily.”