© Reuters. FILE PHOTO: A wagon of a freight train of the Kansas City Southern (KCS) Railway Company is pictured in Toluca, Mexico October 1, 2018. REUTERS/Edgard Garrido/File Photo

(Reuters) – Canadian National Railway Co is expected to sweeten its takeover bid for Kansas City Southern (NYSE:), the Wall Street Journal reported on Thursday, citing people familiar with the matter.

The new proposal could include an agreement to cover the $700 million breakup fee Kansas City Southern would owe Canadian Pacific (NYSE:) Railway Ltd if it walked away from the existing merger agreement, the report https://www.wsj.com/articles/canadian-national-expected-to-sweeten-kansas-city-southern-bid-11620930880?st=85i11yp8dda0sch&reflink=article_copyURL_share said.

Kansas City Southern had asked Canadian National, which put in a bid seeking to wrest the railroad operator from Canadian Pacific last month, to make adjustments to its proposal, according to the report.

Canadian Pacific and larger rival Canadian National 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.

Canadian National launched an unsolicited cash-and-stock offer valuing KCS at about $29.55 billion, after Canadian Pacific agreed to buy KCS for about $25 billion in March.

The U.S. Surface Transportation Board last week approved the voting trust for Canadian Pacific’s proposed acquisition.

Canadian National Railway and Kansas City Southern did not immediately respond to Reuters requests for comment.

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