ETFs That Stand to Benefit From the Historic UNP-NSC Merger

In a bid to create America’s first transcontinental railroad, Union Pacific (UNP) has announced an $85 billion cash-and-stock deal to acquire Norfolk Southern Corporation (NSC). This marks the largest railroad merger in history and the biggest M&A transaction of 2025 to date (read: S&P 500's Record Streak Boosts High Beta, Momentum ETFs).

This landmark Union Pacific–Norfolk Southern merger is poised to reshape U.S. freight rail by forming the first coast-to-coast operator. Investors could tap the opportune moment by investing in ETFs with substantial allocations to these stocks. These include iShares US Transportation ETF (IYT), ProShares Supply Chain Logistics ETF (SUPL), Themes US Infrastructure ETF (HWAY) and First Trust Nasdaq Transportation ETF (FTXR).

Deal in Focus

Per the terms of the deal, NSC shareholders will receive $88.82 in cash and a UNP share for each share of NSC. The offer price of $320 per share represents a total enterprise value for Norfolk Southern of $85 billion based on Union Pacific’s closing stock price on July 16, 2025, and a 25% premium to Norfolk Southern's weighted average share price over the prior 30 days.

Norfolk Southern shareholders will hold approximately 27% of the merged company.

The merged company would span over 50,000 route miles across 43 states, linking about 100 North American ports, and creating a logistics powerhouse valued at over $250 billion. The merger aims to eliminate interchange delays, open new routes, expand intermodal services and reduce transit times on key rail corridors.

The deal, approved by the board of directors of both companies, is expected to close by early 2027. The transaction is expected to generate an estimated $2.75 billion in annualized synergies. The deal is projected to be EPS-accretive in the second full year after closing, and rise to high single-digit EPS growth thereafter.

The Surface Transportation Board is expected to conduct a 16-month statutory review once the companies file their application, which could occur within six months.

Any Headwinds?

The landmark deal is expected to draw intense regulatory scrutiny, serving as a key test of the Trump administration’s stance on antitrust enforcement. Meanwhile, the merger faces stiff opposition from major railroad labor unions, who cite potential job losses, safety risks and service disruptions. SMART-TD, the largest rail operating union in North America, said it plans to oppose the deal before the Surface Transportation Board.

ETFs Set to Benefit

iShares U.S. Transportation ETF (IYT)

iShares U.S. Transportation ETF tracks the S&P Transportation Select Industry FMC Capped Index, giving investors exposure to a small basket of 44 securities. UNP and NSC are among the top 10 holdings in the basket, accounting for 16.1% and 4.8% of total assets, respectively. From a sector perspective, rail transportation takes the largest share at 23.5%, while passenger ground transportation, passenger airlines, air freight & logistics, and cargo ground transportation round off the next three spots with double-digit exposure each. iShares U.S. Transportation ETF has accumulated $750.6 million in its asset base and charges 39 bps in annual fees. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (see: all the Industrials ETFs here).

ProShares Supply Chain Logistics ETF (SUPL)

ProShares Supply Chain Logistics ETF is the first ETF focused exclusively on companies that have high exposure to the growing supply chain logistics theme. It follows the FactSet Supply Chain Logistics Index, charging investors 58 bps in annual fees. ProShares Supply Chain Logistics ETF holds 40 stocks in its basket, with NSC and UNP occupying the top 10 holdings and making up for more than 4% share each. It has amassed $1 million in its asset base and charges 58 bps in fees per year from investors.

Themes US Infrastructure ETF (HWAY)

Themes US Infrastructure ETF seeks to track the Solactive United States Infrastructure Index, which identifies 100 US infrastructure companies that derive their revenues from either Building Materials & Equipment, Construction, Logistics, and Engineering Services. It holds 98 stocks with NSC and UNP occupying the top 10 holdings and making up for 4.5% and 3.7% share, respectively. Themes US Infrastructure ETF has amassed $1.2 million in its asset base and charges 29 bps in annual fees. It has a Zacks ETF Rank #2 (Buy).

First Trust Nasdaq Transportation ETF (FTXR)

First Trust Nasdaq Transportation ETF offers exposure to the 38 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. NSC and UNP occupy the top 10 holdings and make up for 4.4% and 3.6%, respectively, in the basket. Automobiles, airlines and railroads are the top three industries in the ETF. First Trust Nasdaq Transportation ETF has amassed $30.2 million in its asset base and charges 60 bps in annual fees. FTXR has a Zacks ETF Rank #3.

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This article originally published on Zacks Investment Research (zacks.com).

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