July 26 (Reuters) - Union Pacific (UNP.N), opens new tab, the largest U.S. railroad operator, could reach an agreement to acquire rival Norfolk Southern (NSC.N), opens new tab as soon as early next week, Bloomberg News reported on Friday, citing people familiar with the matter.

Union Pacific had said on Thursday it is in advanced talks to acquire its rival, signaling that a deal to form a $200 billion coast-to-coast rail company could be close - and potentially trigger further consolidation among remaining freight rail giants.

Union Pacific declined to comment, while Norfolk Southern did not immediately respond to a Reuters request for comment.

The combination, which would be the largest-ever buyout in the sector, would create the first modern West-to-East single-line freight railroad in the United States, significantly affecting how goods from grains to chemicals to autos move across the country.

The fact that talks are advancing has surprised many in the rail industry and Wall Street as the U.S. freight rail system already functions as two regional duopolies by point of origin.

The talks show how thinking around antitrust issues has shifted under President Donald Trump's administration, with his executive orders aimed at removing anti-competitive barriers and opening the door to potential megamergers in the industry.

If completed, the deal would combine Union Pacific’s dominant position in the western two-thirds of the U.S. with Norfolk Southern’s 19,500-mile network spanning 22 eastern states.

Union Pacific is valued at approximately $138 billion, according to LSEG data. The company has been grappling with sluggish automotive volumes and volatile coal shipments as power producers shift to natural gas, which is shipped by pipeline.

Norfolk Southern, which is worth about $63 billion, is emerging from a turbulent period that included the ouster of its former CEO amid ethics investigations, a high-profile boardroom clash with activist investor Ancora, and a costly train derailment that set the company back about $1.4 billion.