By Manish Parashar

(Reuters) -- Canadian Pacific Railway Ltd has made an unsolicited cash and stock bid for U.S. railroad operator Norfolk Southern Corp valued at $28.35 billion, as it looks to gain a foothold in the eastern United States.

Norfolk Southern called Canadian Pacific's offer "low-premium, non-binding and highly conditional," but said it would carefully evaluate the offer.

Canadian Pacific is offering Norfolk Southern shareholders $46.72 in cash and 0.348 Canadian Pacific for every Norfolk Southern share they own.

That works out to about $94.94, a 9 percent premium to Norfolk Southern, based on both stocks' Tuesday close.

Canadian Pacific, with a market value of C$21.15 billion ($15.89 billion), said it expects a green signal from the U.S. Surface Transportation Board and Canadian regulators for a deal.

However, Norfolk Southern, which has a market value of about $23.36 billion, said any "consolidation among Class I railroads in North America would face significant regulatory hurdles."

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, a former CEO at Canadian National Railway, has for years highlighted the value of consolidation.

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.

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.

(Reporting by Manish Parashar in Bengaluru; Editing by Sriraj Kalluvila and Tom Brown)