It was recently reported that the U.S. Surface Transportation Board (STB) rejected Canadian National Railway Company’s (CNI Quick QuoteCNI - Free Report) proposal to set up a voting trust for the acquisition of Kansas City Southern . Soon after, there was another development on the issue that has been grabbing headlines in the railroad space in the past few months.

As mentioned in our previous write-up on the Kansas City Southern’s takeover story that another suitor Canadian Pacific Railway Limited (CP Quick QuoteCP - Free Report) had informed the former on Aug 31 (following the STB snub of Canadian National’s bid) that its $300 per share or $31-billion offer (inclusive of $3.8 billion outstanding debt of Kansas City Southern) was valid till Sep 12. The Kansas, MO-based railroad operator’s board, which had previously declined the cash and stock offer, agreed to take another look at the same.

Kansas City Southern intends to engage in talks with Canadian Pacific shortly as it perceived that the latter’s unsolicited acquisition proposal might lead to a better deal than the one made by Canadian National.

Going by the Kansas City Southern press release, management clearly pointed out that the initiation of discussions does not necessarily assure a transaction with Canadian Pacific. However, resumption of a dialogue is gladly welcomed by Canadian Pacific. Moreover, we believe that the STB’s approval of Canadian Pacific’s request for using a voting trust, places the latter at an advantage.

Watch this space for more updates on the hot topic in the railroad space.

Zacks Rank & Key Pick

Kansas City Southern currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the Zacks Transportation-Rail industry is Union Pacific Corporation (UNP Quick QuoteUNP - Free Report) , presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Union Pacific have gained 12.4% in a year’s time.