Norfolk Southern still isn't interested in Canadian Pacific's sweetened offer of roughly $31 billion US to buy the railroad.

Norfolk Southern's board unanimously rejected the latest offer Wednesday, calling the bid "grossly inadequate" and unlikely to pass muster with regulators.

Norfolk Southern said if Canadian Pacific is serious about the offer, it should ask regulators for preliminary approval of the deal's proposed structure. Canadian Pacific rejected that request last week, saying that it was unnecessary.

"You continue to publicly declare that we are not 'engaging' or 'meeting' with you. There is no basis to meet until you both make a compelling offer and address the regulatory issues," Norfolk Southern's board said in a written response.

Canadian Pacific spokesman Martin Cej said the railroad couldn't immediately comment Wednesday morning because it was still reviewing Norfolk Southern's letter.

Expect a proxy fight

Industry analysts expect Canadian Pacific's takeover offer to morph into a proxy fight ahead of Norfolk Southern's annual meeting, which is usually held in May.

Canadian Pacific has already reached out to shareholders of Norfolk Southern.

Canadian Pacific's CEO Hunter Harrison has said this deal would create a more efficient railroad that would link major ports, and should produce roughly $1.8 billion in cost savings annually. Most of those savings, however, would be realized at Norfolk Southern.

Regulatory hurdles

While Canadian Pacific insists the deal would be approved, Norfolk Southern points out that no major railroad mergers have been completed since federal regulators imposed tougher restrictions in 2001.

Mergers and acquisitions are being attempted this year at an unprecedented pace. The total combined value of all pending mergers in 2015 is $1.86 trillion, more than double the amount last year, according to Dealogic.

Canadian Pacific has estimated that its cash and stock offer could be worth as much as roughly $40 billion to $45 billion. But much of that is based on the projected value of stock in a new company that would own both railroads.

The latest offer also includes a payment that would vary based on the stock price of the new company and could add as much as $3.4 billion if shares of the combined company were worth $150 in October 2017. But if the shares are worth more than $175, the payment would be reduced to zero.

Norfolk Southern has estimated that the cash and stock Canadian Pacific is offering was worth roughly $27.4 billion based on current share prices. The variable payment could make the offer worth nearly $31 billion.