Union Pacific to buy Norfolk Southern in $85 billion deal

** Union Pacific UNP.N to buy smaller rival Norfolk Southern NSC.N in an $85-billion deal

** NSC down 2.9%, UNO slips 2.1% in early trading

** Merger will create United States' first coast-to-coast freight rail operation

** Combined enterprise value of company expected to be $250 bln, marking the largest-ever U.S. rail merger

** Transaction could face several regulatory hurdles

** NSC reports Q2 profit rise

** YTD, NSC up 22%, UNP up nearly 0.5%