Reuters — Canadian Pacific Railway (CP) on Tuesday revised its bid to buy U.S. railroad operator Norfolk Southern Corp, less than a week after its prior $28.4 billion proposal was rejected but the new offer was promptly rejected again.

Calgary-based CP said it was now offering $32.86 in cash and 0.451 of a share in a new holding company that would own both Norfolk Southern and CP. To alleviate regulatory concerns, CP said it was prepared to close the transaction using a voting trust (all figures US$).

The proposal was flatly rejected by Norfolk, however, which said it had reviewed a voting trust structure and it did not see this winning approval from regulators who typically take close to two years to review any rail mergers in the U.S.

“Canadian Pacific’s revised, reduced proposal is not only less than what the Norfolk Southern board has already found to be grossly inadequate, it is even more uncertain and risky given the decrease in the cash consideration,” Norfolk Southern CEO James Squires said in a statement on Tuesday.

Shares in Norfolk Southern fell 2.75 per cent to $89 in trade before the morning bell on Tuesday.

U.S. regulators have long been skeptical about rail mergers. Canadian National Railway’s (CN) bid to buy Burlington Northern Santa Fe was blocked by authorities in 1999-2000.

The new holding company would be listed both on the New York and Toronto stock exchanges, CP said.

To ensure against any unlawful control violation, CP said an independent trustee would be appointed to oversee either CP, or Norfolk while in trust. It also said that while in trust, its CEO Hunter Harrison would sever all ties with CP and become CEO of Norfolk, with his No. 2 Keith Creel assuming the helm at CP.

Harrison has built a reputation as a turnaround expert in the rail industry and has dramatically improved CP’s metrics since taking the helm of the company.

CP said even if regulators ultimately decide that a merger will not be permitted, operational improvements will by then have materially increased the value of Norfolk benefiting all shareholders.

“We view this announcement positively as it demonstrates CP’s strong commitment to pursuing the acquisition,” Desjardins analyst Benoit Poirier said in a note, adding that the level of complexity in the CP proposal indicates that a thorough analysis has been performed in order to set up a deal that may be viewed favorably by regulators.

— Allison Lampert and Euan Rocha are Reuters correspondents covering the transportation sector from Montreal and mergers and acquisitions from Toronto respectively. Additional reporting for Reuters by Sneha Banerjee in Bangalore.