Morningstar

Berkshire Hathaway: Union Pacific’s Merger With Norfolk Southern Has Raised the Stakes for BNSF

With BNSF trailing Union Pacific, the last thing it needs is to worsen its position by not pursuing a transcontinental railroad.

Logotypen för Berkshire Hathaway Inc. visas vid en handelspost på golvet på New York Stock Exchange, 30 augusti 2023.
Richard Drew via AP
Securities in This Article
Union Pacific Corp
(UNP)
CSX Corp
(CSX)
Norfolk Southern Corp
(NSC)
Berkshire Hathaway Inc Class B
(BRK.B)

Key Morningstar Metrics for Berkshire Hathaway

Union Pacific UNP has announced an $85 billion deal to combine with Norfolk Southern NSC. We now believe that with a deal to create the a transcontinental US railroad on the table, Berkshire Hathaway’s BRK.B BNSF railway subsidiary can no longer afford to ignore CSX CSX.

Why it matters: The announced Union Pacific/Norfolk Southern merger has set the price that Berkshire will likely need to match if BNSF pursues a merger with CSX.

  • We’ve always believed a tie-up between one of the two main western railroads (BNSF and Union Pacific) with one of the two main eastern railroads (CSX and Norfolk Southern) would be strategically favorable for both carriers, creating a transcontinental US railroad marked by nascent seamless service corridors that avoid interchange bottlenecks in Chicago and Houston.
  • Union Pacific believes the merger will create a faster cross-country solution for shipments, potentially being one to two days faster than current routes, which would make rail more competitive with truck shipments, especially for intermodal freight.

The bottom line: With BNSF already trailing Union Pacific, its main competitor in the western US market, the last thing it needs is to worsen its competitive position by not pursuing a transcontinental US railroad footprint.

  • Given Berkshire’s historical aversion to engaging in bidding wars, we don’t see them chasing Norolk Southern. But Berkshire won’t have the luxury of sitting around and waiting for CSX, and it will likely need to put together an offer in the near term if it wants to evolve into a transcontinental US railroad.
  • Berkshire had more than $330 billion in cash on hand (including $290 billion in dry powder) at the end of March 2025, so a bid for CSX in the $83 billion range would not be an issue. Our fair value estimate remains in place for the narrow-moat firm.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

Sponsor Center