Semafor reported on Wednesday, citing people familiar with the matter, that the company is working with Morgan Stanley to evaluate a possible deal for a rival.

Union Pacific (UNP) edged lower in premarket trading on Thursday after a report stated that the railroad operator is considering acquiring a rival, sending shares of its peers, CSX and Norfolk Southern, higher.

Semafor reported on Wednesday, citing people familiar with the matter, that Union Pacific is working with investment bankers at Morgan Stanley to evaluate a possible deal for a rival.

While Union Pacific CEO Jim Vela has spoken about the benefits of a transcontinental railroad in the past, any such mergers would invite regulatory scrutiny. While the report did not confirm which company Union Pacific was looking to acquire, its East Coast counterparts, Norfolk Southern and CSX, gained 2.7% and 4.8%, respectively, in premarket trading.

As of their closing prices on Wednesday, CSX has a market valuation of $62 billion, while Norfolk Southern is valued at $58 billion. Omaha, Nebraska-based Union Pacific was valued at $138 billion.

Retail sentiment on Stocktwits about Union Pacific and CSX was in the ‘bullish’ territory, while traders were ‘bearish’ about Norfolk Southern.

While Trump’s White House has been friendlier to large mergers compared to the previous Biden administration, the sheer size of the company, as well as the involvement of unions, will likely raise questions about the future of the potential deal.

The Semafor report noted that if Union Pacific can strike a deal, it could argue to regulators that a coast-to-coast railroad would better compete against the trucking industry, which still handles more than 70% of domestic freight.

“Exploring a bid for an acquisition of a rival is music to my ears. It's a long shot and is just noise at this point, but in the meantime, I welcome the share price discounts and will add at market open,” one trader said on Stocktwits.

Separately, Union Pacific raised its quarterly dividend by 3% to $1.38 per share.

Union Pacific stock has gained marginally this year, while CSX is up 2.2% and Norfolk Southern has gained 9.6%.

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