Montreal Quebec - CN is expected to sweeten its takeover bid for KCS, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
 
The new proposal could include an agreement to cover the US$700 million breakup fee KCS would owe CP if it walked away from the existing merger agreement, the report said.
 
KCS had asked CN, which put in a bid seeking to wrest the railroad operator from CP last month, to make adjustments to its proposal, according to the report.
 
CP and larger rival CN are in a race to take over the U.S. railroad operator, which would create the first direct railway linking Canada, the United States, and Mexico.
 
CN launched an unsolicited cash-and-stock offer valuing KCS at about US$29.55 billion, after CP agreed to buy KCS for about US$25 billion in March.
 
The U.S. Surface Transportation Board last week approved the voting trust for CP's proposed acquisition.
 
CN and KCS did not immediately respond to Reuters requests for comment.
 
Sanjana Shivdas.