Canadian Pacific Railway (CP) has entered into an agreement to acquire Kansas City Southern (KCS), World Grain reported on 15 September.

The US$31bn agreement followed lengthy negotiations between three of North America’s largest rail companies and the merger would create the first US-Mexico-Canada rail network, the report said.

Following the transaction, the combined rail company would expand to 32,186km (20,000 miles) according to a World Grain report on 25 March, and would lead to improved efficiency and supply chain integration for grain companies and others.

“We are excited to get to work bringing these two railroads together. By combining, we will unlock the full potential of our networks,” CP president and chief executive Keith Creel was quoted as saying.

The new US-Mexico-Canada rail network would offer new single-line offerings, Creel added.

As part of the agreement CP would take on KCS’s outstanding debt of US$3.8bn, the report said.

To progress with its deal with CP, KCS firstly had to terminate its proposed merger with Canadian National (CN), World Grain wrote, which would have significant financial implications.

As part of the termination agreement, KCS would have to pay CN $1.4bn (US$1.1bn), which included a termination fee of US$700M and a US$700M refund of the fee CN had paid for KCS to terminate its deal in May with CP, according to the report.

KCS and CN had appeared on the verge of completing their own deal until the Surface Transportation Board (STB) had issued a unanimous decision on 31 August rejecting the use of a voting trust agreement in connection with the proposed transaction between CN and KCS, the report said.

CN had had a few days to come up with an improved offer for KCS, but ultimately decided to agree to an early termination of the deal provided for in the CN merger agreement.

“We believe that the decision not to pursue our proposed merger with KCS any further is the right decision for CN,” CN president and chief executive officer JJ Ruest was quoted as saying.