By Cara Lombardo and Miriam Gottfried

Kansas City Southern has rejected a roughly $20 billion takeover offer from a group of investors, arguing that the bid undervalues the railroad operator, according to people familiar with the matter.

Global Infrastructure Partners and the infrastructure arm of private-equity giant Blackstone Group Inc. had offered Kansas City Southern $208 a share, some of the people said. Kansas City rejected that offer after earlier brushing back a bid that was below $200 a share, the people said. The two sides aren't in discussions.

The most recent offer, which The Wall Street Journal first reported last week without quantifying it, represented a roughly 35% premium to Kansas City Southern's share price before the Journal reported that the firms were contemplating a bid in late July, when the stock was already rising on speculation of a potential takeover.

Write to Cara Lombardo at cara.lombardo@wsj.com and Miriam Gottfried at Miriam.Gottfried@wsj.com