Canadian Pacific Railway (CP) has agreed to acquire Kansas City Southern (KCS) in a cash and stock deal of approximately $29bn, which includes a $3.8bn assumption of outstanding KCS debt.

After the closure of a voting trust, the common shareholders of KCS will obtain $90 in cash for each KCS common share held and 0.489 of a CP share.

After receiving the final approval from the US Surface Transportation Board (STB), the transaction will result in the merger of the two railroads in Kansas City, Missouri, to form a rail network linking the US, Mexico and Canada.

The merged entity will be known as Canadian Pacific Kansas City (CPKC).

CP president and CEO Keith Creel said: “This transaction will be transformative for North America, providing significant positive impacts for our respective employees, customers, communities, and shareholders. This will create the first US-Mexico-Canada railroad, bringing together two railroads that have been keenly focused on providing quality service to their customers to unlock the full potential of their networks.

“CP and KCS have been the two best performing Class 1 railroads for the past three years on a revenue growth basis. The new competition we will inject into the North American transportation market cannot happen soon enough, as the new USMCA Trade Agreement among these three countries makes the efficient integration of the continent’s supply chains more important than ever before.”

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KCS president and CEO Patrick J Ottensmeyer said: “KCS has long prided itself in being the most customer-friendly transportation provider in North America. In combining with CP, customers will have access to new, single-line transportation services that will provide them with the best value for their transportation dollar and a strong competitive alternative to the larger Class 1s. Our companies’ cultures are aligned and rooted in the highest safety, service and performance standards.”

The merged entity will link customers through single-network transportation offerings between points on CP’s system throughout Canada, the US Midwest, and the US Northeast and points on KCS’ system throughout Mexico and the South Central US.