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* Offers a "sizable premium in cash and stock"
* Expects a deal to win regulatory approval (Adds background, details)
Nov 17 (Reuters) - Canadian Pacific Railway Ltd said it offered to buy U.S. railroad operator Norfolk Southern Corp, as it looks to gain a foothold in the eastern United States.
Shares of Norfolk Southern, which has a market value of about $23.36 billion, were down slightly after rising as much as 6 percent in after-hours trading on Tuesday.
The proposal includes a "sizable premium in cash and stock" to Norfolk shareholders, Canadian Pacific said, without providing further details.
Canadian Pacific said it expects a green signal from the U.S. Surface Transportation Board and Canadian regulators for a deal.
However, regulators have not been very open to railroad mergers. Canadian National Railway Co's bid to buy Warren Buffett-owned Burlington Northern Santa Fe was blocked by U.S. regulators in 1999-2000.
Canadian Pacific's talks with CSX Corp, which also owns a large network across the Eastern United States, failed last year.
A deal would improve congestion around Chicago, Canadian Pacific said in the statement on Tuesday.
East- and west-based North American railways meet in Chicago and hand off cargo, a process that can take days.
The new company would give shippers the choice of where they can connect with another railroad along its network, bringing an end to the practice of "bottleneck pricing", Canadian Pacific said.
Canadian Pacific Chief Executive Hunter Harrison, who was earlier CEO at Canadian National Railway, has for years highlighted the value of consolidation.
Canadian Pacific, with a market value of C$21.15 billion ($15.89 billion), said on Tuesday it hopes Norfolk "would give this offer due consideration".
A Norfolk spokeswoman declined to comment.
Companies rarely go public with offers that are in the works unless there is resistance from the takeover candidate.
Norfolk Southern operates 20,000 route miles in 22 states, mostly in Eastern United States, while Canadian Pacific transports to eight major ports in the United States and Canada, including Vancouver and Montreal.
Bloomberg earlier this month reported that Canadian Pacific was exploring a takeover of Norfolk.(bloom.bg/1ScVTK4)
U.S. railroad stocks have dropped sharply this year, hurt by a fall in high-margin coal shipments and weak oil prices.
Up to Tuesday's close, Canadian Pacific's shares had fallen nearly 33 percent this year, while Norfolk Southern's stock had lost about 24 percent. ($1 = 1.33 Canadian dollars) (Reporting by Manish Parashar in Bengaluru; Editing by Don Sebastian and Sriraj Kalluvila)