But Canada's No. 2 railway confirming yesterday that a consortium led by Brookfield Asset Management Inc. had shown interest in taking over the railway did little more than put a face on one of the many players circling the smallest of North America's Class 1 rail operators.

CP confirmed yesterday it had been approached in April by the Toronto-based private-equity player, which was seeking "exclusive negotiations and due diligence" in a bid for the railway. The railway's board of directors, however, considered the inquiry "inadequate" and declined to enter into discussions. That was the last the railway heard from Brookfield, according to a CP spokesman.

"While CP continues to receive such inquiries, it is not at this time in negotiations with any party with respect to a business combination," the railway said.

Nevertheless, CP's stock shot up by about 15% on both the Toronto Stock Exchange and the New York Stock Exchange on the news, leading some to warn that its share price was overheated and investors should use the strength to lighten their position.

"Given the considerable increase in the stock price, we believe the likelihood of a transaction is quite small, while the potential upside in the event of a transaction is not big enough compared to the downside risk," said New York-based Citigroup Investment Research analyst John Kartsonas.

Interest in North America's freight rail industry has been strong in recent years, with savvy investors such as Warren Buffet drawn to its steady returns.

The so-called rail renaissance has been built on the back of explosive growth in outsourcing to China, and the rails have hedged against a potential downturn in the North American economy by increasing their exposure to the global market.

In addition, higher fuel prices have served to undercut the industry's primary source of competition, the trucking industry.

The result is that in recent years demand for the rails has outstripped capacity for the first time in a half century, bringing not only pricing power to the railway operators, but also investors and private-equity players to their doors. CP, being the smallest of the North American Class 1 railroads, has become an attractive target even though management has shown little interest in a takeover.

"The rail industry is enjoying real pricing power, return over and above the cost of capital, and strong cash flows," said National Bank Financial analyst David Newman. "In short, times are good, and we believe it would take a compelling deal to convince the players in the industry to sell at the current time."

Mr. Newman said in a note that if Brookfield manages to stir up a bidding war for CP, he expects both financial players, including Australia's Macquarie Bank, and strategic players, such as Union Pacific, which already shares part of its network with CP, to enter the ring.

Based on recent transactions in the industry, a competitive bid for CP could garner up to $100 a share, or $18.4-billion, Mr. Newman estimates.