Reuters — Kansas City Southern on Friday reiterated that Canadian National Railway’s offer was “superior” after Canadian Pacific Railway refused to raise its bid, moving a step closer to creating the largest-ever merger of North American railways by transaction value.

The Canadian rivals have been locked in a takeover battle for the U.S. railroad operator for two months to create the first railway spanning the U.S., Mexico and Canada, as they stand to benefit from a recent pick-up in trade.

Kansas City Southern last week accepted CN’s $33.6 billion offer, upending a $29 billion deal with its competitor CP (all figures US$).

The U.S. railroad on Friday said it paid CP a breakup fee of $700 million, which would be reimbursed by CN.

CP said Friday it was willing to re-engage with Kansas City, hoping that the rival bid would be shot down by the U.S. Surface Transportation Board (STB), a regulator that oversees railroad companies.

CN’s deal has recently run into regulatory hurdles, with the STB having denied its motion for approval of a voting trust earlier this week. The U.S. Department of Justice had also said last week that CN’s bid for Kansas City appears to pose greater risks to competition.

CN and Kansas City said they expect to gain all the required regulatory approvals, including that from STB.

Kansas City said the deal is expected to close in the second half of next year, following which its shareholders will own 12.6 per cent of the combined company.

— Reporting for Reuters by Arathy S Nair and Sanjana Shivdas in Bangalore.

Tagged bid, cn, cp, Kansas City Southern, merger, railway, STB, Surface Transportation Board, voting trust