Canadian Pacific Railway Ltd. is exploring a takeover of U.S. carrier Norfolk Southern Corp., people familiar with the matter told Bloomberg.
The move is an attempt to consolidate the North American railroad industry.
Two of the people, who asked not to be identified because discussions are private, told Bloomberg that Canadian Pacific, the second biggest railroad in Canada, has already held early-stage merger talks with Norfolk Southern.
The company is also raising financing for the possible merger.
The two people cautioned Bloomberg that discussions are still in the preliminary stage and the talks may not progress or lead to a deal.
The New York Times adds that Norfolk Southern has a market value of close to $24 billion as of Friday's market close.
Canadian Pacific was valued at $20.5 billion.
The New York Times adds that if the merger of the two companies is completed, it would be the latest in a series of mergers among railroad companies over recent decades.
The series of mergers have concentrated the stewardship of the tracks that crisscross the continent to a handful of corporations.
The New York Times adds that Norfolk Southern and its primary rival CSX operates in the eastern half of the U.S.
Union Pacific and Burlington Northern operate in the western half of the country.
Bloomberg adds that a move for Norfolk Southern, the second-biggest railroad in the eastern U.S. would revive the company's effort to build a transcontinental carrier.
The company attempted to do the same last year, but talks with CSX failed.
Benoit Poirier, an analyst at Desjardins Capital Markets, told Bloomberg that possible deal is viewed positively.
"We would view a potential transaction positively," he said.
Bloomberg adds that Poirier said the challenge for the deal is winning the approval from regulators.
This makes it "unlikely that a transaction can be completed in the short term."
The New York Times adds that shares of Norfolk Southern surged more than 11 percent in midafternoon trading on Monday following the news report on the talks.
Canadian Pacific's shares were up six percent.
