Final government approval will be announced today for Southern Railway and Norfolk & Western Railway to be merged into a 21-state freight railroad enterprise that will be the most profitable corporation in America's transportation industry.

Washington-based Southern and N&W, with headquarters in Roanoke, will combine as Norfolk Southern Corp., a holding company under which the two railroads will be operated largely as separate entities. Norfolk Southern also is expected to expand into other transportation businesses--building on N&W's recent acquisition of a one-fifth ownership of Piedmont Airlines.

Northern Virginia is considered the most likely location for a relatively small combined headquarters operation of the new company, although other areas of Virginia also are under scrutiny.

Norfolk Southern will have 42,600 employes, operating more than 1,000 freight trains a day over 17,860 route miles and more than 31,000 miles of track throughout the Southeast and Midwest. N&W's key western terminals at Chicago, Detroit, Cleveland and Kansas City will become part of a system that stretches into Florida and to Mobile, Ala., New Orleans and Memphis, forming the fourth-largest U.S. rail network.

Combined revenues exceeded $3.6 billion in 1981, assets were $6.4 billion and profits topped $500 million, the highest in the industry. As Dean Witter Reynolds stock analyst Jack Kawa described the combination, N&W and Southern are "the premier low-cost eastern railroads."

Under the merger agreement, Southern stockholders will get 1.9 shares of Norfolk Southern common for each share of Southern, while N&W owners will get one share of the new firm for each share of N&W.

In the planning stages for about two years, the Southern-N&W merger needs only a favorable nod from the Interstate Commerce Commission, which has scheduled a briefing this morning to announce its decision. Approval by that agency has been a foregone conclusion for some time, and ICC sources said a unanimous decision by members of the commission was reached last week.

In line with a new policy announced last Friday by ICC Chairman Reese Taylor Jr., the Southern-N&W merger approval does not include any requirements that "protection" be provided competing railroads. Virtually all rail combinations approved in this century have required that new enterprises grant certain business volumes to railroads that might suffer from the competitive edge of a larger line.

At the same time, an ICC source said the merger approval today will include some requirements designed to prevent anticompetitive developments. Officials of the two companies have predicted that the first benefit from the merger will be improved service to customers, which would be followed by increased business volume and annual savings from merged rail yard and other operations of about $100 million a year within three years.

The new railroad cannot begin operations for a 30-day period starting today, and Southern spokesman William Geeslin said yesterday he does not know if Norfolk Southern will be ready to set up shop as soon as the waiting period expires. However, after a year and a half of planning that has involved officials from all departments of the two railroads, a formal combination is expected to take place swiftly.

In the near future, directors from each firm will meet to elect eight persons from each board to form the new board of Norfolk Southern. That new board then will meet and elect the rail firm's two top officers. Geeslin said the new executives would choose a headquarters site and the actual combination date.

According to officers of N&W and Southern, the sales and marketing operations of the separate companies will be joined immediately under the combined headquarters in an effort to eliminate any possible bias for one road.

This is in sharp contrast with CSX Corp. of Richmond--the merged Chessie Systems and Seaboard Coastline--which has maintained separate marketing shops. CSX, with a larger (26,600-mile) route system also linking the South and Midwest, will be the major competitor of Norfolk Southern Corp.

"We're trying to form a partnership rather than set up competitive managements," said N&W President Robert Claytor.