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UBS on STB Putting Union Pacific-Norfolk Southern Revised Application on Hold

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The Surface Transportation Board (STB) this week accepted the Union Pacific-Norfolk Southern revised merger application, but put the review process on hold until July 27 pending further information, UBS notes.

The STB identified nine areas where they require supplemental information. UBS believes the area of enhanced competition tops the list as it has received the most pushback from other railroads and constituencies like shipper groups.

The board noted the UP-NS Competitive Gateway Pricing (CGP) was the sole competitive enhancement within the merger proposal and requested information about the exclusions to the use of CGP, including the potential consumer surplus that would be generated if the exclusions were not in place and also the logic for putting these exclusions in place. "The decision points to potential STB interest in removing exclusions / broadening the application of CGP and also potentially making the program permanent (vs the proposed 5 yr period)," UBS writes.

UBS expect other Class I railroads to show the greatest resistance to the merger while other constituencies (shippers, unions) are also factors in the process.

Price: $164.28, Change: $+0.46, Percent Change: +0.28%

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