On Tuesday, CN Rail announced a cash-and-stock bid valued at US$33.7 billion for Kansas City Southern (KCS), topping one made last month by Canadian Pacific (CP) Railway valued at US$25 billion. The offer is said to represent a 21 per cent premium to CP’s offer and more than double the cash per shares, giving KCS shareholders potentially greater value. However, the regulatory risk may be higher for KCS with CN as CP’s network does not overlap with the KCS system. Any takeover of KCS will face close scrutiny by the US Surface Transportation Board (STB). It requires that rail takeovers foster competition and do not reduce choices for the companies that rely on the rails to reach markets. However, KCS is the smallest of the big railways that operate in the United States, and the STB has not said if it will apply this standard to any deal involving KCS.