Canadian Pacific Railway on Sunday said it has agreed to buy Kansas City Southern for $25 billion in a cash-and-shares deal to create the first rail network connecting the United States, Mexico, and Canada, betting on a pick-up in North American trade. CNBC's Jim Cramer and David Faber discuss. Subscribe to CNBC PRO for access to investor and analyst insights: https://cnb.cx/2Vtntx6

Canadian Pacific Railway on Sunday said it has agreed to buy Kansas City Southern for $25 billion in a cash-and-shares deal to create the first rail network connecting the United States, Mexico, and Canada, betting on a pick-up in North American trade.

Shareholders of Kansas City Southern will receive 0.489 of a Canadian Pacific share and $90 in cash for each KCS common share held, the companies said in a joint statement. The deal, which has an enterprise value of $29 billion including debt, values Kansas City Southern at $275 per share, representing a 23% premium to Friday’s closing price of $224.16.

The transaction is the biggest M&A launched in 2021.

“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,” Canadian Pacific Chief Executive Keith Creel said in the statement. “This will create the first U.S.-Mexico-Canada railroad.”

The new and modernized U.S.-Mexico-Canada trade pact took effect in July last year, replacing the earlier deal that lasted 26 years, and is expected to further foster manufacturing and agriculture trade activities among the three countries.

Kansas City Southern’s board has approved the bid and the two companies have notified the U.S. Surface Transportation Board to seek the agency’s required approval. Canadian railroad operators’ attempts to buy U.S. rail companies have met limited success because of antitrust concerns.

Creel will continue to serve as CEO of the combined company, which will be headquartered in Calgary, the statement said.

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