Canadian Pacific Railway announced today that it has agreed to acquire Kansas City Southern Railway (KCS) to create the first rail network linking Canada, the United States and Mexico.
AFP reports that a joint statement from the two companies states that the cash and stock deal is valued at approximately $29 billion, including the assumption of $3.8 billion of Kansas City Southern’s outstanding debt.
Keith Creel, president and CEO of Canadian Pacific Railway, said, “This transaction will make a difference in North America and provide a significant positive impact for our respective employees, customers, communities and shareholders.”
Creel added, “This will create the first rail link between the United States, Mexico and Canada.”
Reuters reports that this is the largest merger so far this year and the largest ever involving two railroad companies.
The combined 32,000-kilometer rail network will allow the Calgary-based Canadian Pacific Railway to access the U.S. heartland through Kansas City, which is well-connected to ports in the Gulf of Mexico from farmland areas in the Midwest.
This connected rail network will also allow Mexican ports and factories to connect with Canadian ports and energy facilities and with factories in the northeastern United States.
Mexico is an important exporter of vehicles, electronics and agricultural products, while also importing large quantities of Ceres and manufactured goods.
The joint statement noted that by expanding market access and providing new transportation options, the deal is expected to stimulate economic growth in North America.
The statement said the merger will benefit from the “United States-Mexico-Canada Agreement” (USMCA) approved by the United States, Canada and Mexico last year, which is a new version of the three-country free trade agreement.
The US-Mexico-Canada trade agreement “makes the effective integration of supply chains on the American continent more important than ever,” Creel said.
Both companies’ boards of directors have approved the deal, although the U.S. Surface Transportation Board must still be agreed to.
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