Kansas City Southern (KSU - Get Report) recently was the beneficiary of a large investment by Keith Meister's activist fund, Corvex Management, raising speculation that the Kansas City, Mo., railroad company could be put in play and acquired at some point down the road.

The fund revealed in an Aug. 15 securities filing that as of June 30 it owned 615,154 shares, valued at the end of June at $55 million.

Speculation has increased of late that the operator of the Kansas City Southern Railway could become an M&A or activist target - especially after Canadian Pacific Railway (CP - Get Report) in April cancelled its hostile $28 billion pursuit of Norfolk Southern (NSC - Get Report) after regulators and at least one key legislator telegraphed messages to the railroad that they had serious reservations with CP's proposed transaction.

In a conference call with analysts shortly after the bid was cancelled, CP CEO Hunter Harrison acknowledged that CP experienced a significant setback with its unsuccessful Norfolk bid but that it was looking at other opportunities. Could an acquisition of KCS be one of them? "We are continually looking for opportunities strategically for this organization to grow and take advantage of our strengths," Harrison told analysts. "Having said that we just got cut off at the pass with M&A activities. But look that's not the end of the world. There are other opportunities for this organization that we'll be continually exploring and for obvious reasons I can't get into the level of detail about what they might be."

In July, Harrison suggested that he still is expecting consolidation in the rail sector. He told the Wall Street Journal that "it's not 'if" it's when."

For many, that means potentially pursuing another acquisition, though perhaps on a smaller scale. And Corvex's acquisition of Kansas City Southern shares suggests that Meister believes the railroad operator could be put in play. And if not willingly, Corvex could agitate for a deal. Corvex is no stranger to campaigns and proxy contests to meet its goals. Meister has launched 13 activist campaigns, including one ongoing one at Pandora Media P as part of his effort to drive change at targeted companies, according to FactSet Inc.

And then there is this: According to a 2014 Trains magazine article, Kansas City Southern was exempted from Surface Transportation Board rules governing railroad mergers. The panel came to the conclusion that a merger between KCS and one of the larger North American railroads "would not necessarily raise the same concerns and risks" as a combination involving other large railroads.

Nevertheless, there are lots of caveats. In November 2015, Harrison also suggested that he was concerned about Kansas City Southern's Mexico operation, noting that he didn't like Mexico because there are " people stopping the trains and stealing all the goods. It's like the Wild West."

John Barnes, analyst at RBC Capital Markets in Richmond, Va., said he believes an acquisition of Kansas City Southern by CP or (CSX - Get Report) (CSX) or any major North American railway company is unlikely because it would be dillutive to the acquiring company's earnings, partly because KCS has been performing so well lately. He also argues that it would also run into regulatory problems from the STB in Washington. KCS stock price has been rising in recent months, up from about $64 in January to trade recently at $96.61 a share, making it a potentially expensive acquisition.

Finally, someone who might have been a major driver of a potential further CP bid is departing the Canadian railroad company's board. Embattled activist investor Bill Ackman and his Pershing Square Capital Management earlier this month liquidated its mammoth CP stake. Ackman had previously suggested that an acquisition of Norfolk was an ideal activist situation. But now he plans to step down from CP's board at its next annual meeting, likely in April 2017, leaving one less potential agitator for a deal. A KCS spokesman did not return calls.

"I don't think U.S. rails are going to look at it and I don't think anyone has the appetite for it," said Barnes. "You would have to prove that it is enhancing competition and regulators won't like it."

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