By Andrew Bary

The reported move by Union Pacific to potentially acquire Norfolk Southern could prompt Berkshire Hathaway to consider a bid for CSX.

Such a deal might be an elephant-sized transaction that Berkshire CEO Warren Buffett has sought for more than a decade that could absorb a chunk of Berkshire's more than $300 billion in cash.

The Wall Street Journal reported Thursday that Union Pacific, one of the two big railroads that operates mainly west of the Mississippi River, is in early talks for a possible deal for Norfolk Southern, one of the two big Eastern railroads.

Burlington Northern Santa Fe (BNSF), which is owned by Berkshire, operates mainly in the Western U.S. and competes against Union Pacific while Norfolk Southern's main rival is CSX, which operates east of the Mississippi.

Both Union Pacific and BNSF are similarly sized, as are Norfolk Southern and CSX.

Berkshire might see a bid for CSX as a defensive maneuver if its chief rival, Union Pacific, seeks to create a transcontinental railroad. Berkshire is unlikely to counterbid for Norfolk Southern since Buffett doesn't like to get into bidding wars for companies.

"I wouldn't rule it out, but this level of M&A activity is likely to drive up target firm valuations and Berkshire is not one to 'chase a deal," CFRA analyst Cathy Seifert told Barron's in an email late Thursday about a possible bid for CSX.

Buffett also has a value investing bent and CSX wouldn't come cheaply. The stock now trades for about 20 times forward earnings before any takeover premium. Buffett generally likes to pay no more than 15 times after-tax earnings for businesses.

Berkshire had no immediate comment.

CSX has a market value of $65 billion while Norfolk Southern is around $60 billion. Union Pacific is much larger than Norfolk Southern with a market capitalization of about $135 billion.

CSX shares gained 1.8% Thursday to $34.50 on reports of the potential bid for Norfolk Southern, and is up another 2.6% in after-hours trading to $35.38. Norfolk Southern stock rose 3.7% to $269.81 Thursday and added another 4.2% to $281 after-hours on the WSJ article.

As the WSJ reported, a Union Pacific/Norfolk Southern deal likely would face major antitrust and regulatory scrutiny.

Until now, investors generally had assumed that a transcontinental railroad merger, despite operational benefits, wouldn't pass antitrust and regulatory scrutiny.

Berkshire might move on CSX because of fear that regulators would approve one transcontinental railroad merger -- the Union Pacific/Norfolk Southern combination -- and not two. By making a bid for CSX, Berkshire would force regulators to look at two deals simultaneously.

Berkshire has plenty of financial wherewithal for a big deal given all its cash. If CSX were to be purchased at a 25% premium to the current stock price, it would cost about $80 billion -- well within Berkshire's means. Indeed, Berkshire had about $90 billion of cash at its holding company level at year-end 2024, meaning it wouldn't need to tap cash at its regulated insurance units to do such a deal.

Berkshire and CSX recently collaborated on the large deployment of equipment for the Florida National Guard that originated in Fort Stewart, Ga., on CSX tracks and then interchanged with the BNSF which operated the trains to Fort Irwin, Calif.

That operation highlights the interconnectedness of the two rail networks.

Buffett, 94, is set to retire at year-end after 60 years at the helm of Berkshire. A deal for CSX could a capstone transaction in a long career of dealmaking that included the purchase of BNSF in 2010.

Write to Andrew Bary at andrew.bary@barrons.com

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July 17, 2025 18:46 ET (22:46 GMT)

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