Canadian National Railway (CNI -1.42%) has launched a $33 billion bid for Kansas City Southern (KSU), trying to break up rival Canadian Pacific Railway's (CP -0.63%) agreement to acquire the U.S. railroad.

Canadian National (CN) is offering cash and stock worth $325 per share for Kansas City Southern, which is about $56 per share more than the initial Canadian Pacific (CP) offer. In a letter to the Kansas City Southern board, CN said it believes its deal would provide greater long-term stability than a CP/Kansas City Southern pairing.

A CN train coming around a bend.

Image source: Canadian National.

"Our proposal clearly provides superior value to the proposed transaction with CP, including greater value certainty for your shareholders given the significantly greater upfront cash consideration," Canadian National CEO Jean-Jacques Ruest wrote.

In March, CP announced plans to acquire Kansas City Southern for about $30 billion in cash and stock. The deal would end a 20-year drought in major railroad deals, and is likely to come under heavy regulatory scrutiny.

Canadian National, like CP, talked up the benefits of a merger that would combine Kansas City Southern's track down the spine of the U.S. and into Mexico with the Canadian railroad's coast-to-coast network.

"Customers of both companies will benefit from faster, more direct and more efficient service for North-South trade," Ruest wrote. "CN and KCS will have a robust network of end-to-end single-line services from Mexico to Canada, with an enhanced ability to connect ports in the Atlantic, Pacific and the Gulf of Mexico."

Canadian National offered to set up a trust similar to a plan arranged between CP and Kansas City Southern to try to alleviate some of the regulatory risk to KCS shareholders. But that structure has come under fire from regulators, and full approval will likely take more than a year in any railroad deal.