CALGARY, Alberta — Canadian Pacific Railway and Kansas City Southern on Wednesday announced they have entered into a merger agreement, under which CP has agreed to acquire KCS in a stock and cash transaction of about $31 billion.

The deal includes the assumption of $3.8 billion of outstanding KCS debt.

KCS also provided notice of termination of its May merger agreement with CN Railway, for which it will pay a $700 million termination fee.

CP and CN have been vying to acquire KCS, and KCS had favored CN until about two weeks ago when federal regulators rejected a key part of the acquisition plan.

“Our path to this historic agreement only reinforces our conviction in this once-in-a-lifetime partnership,” said CP President and Chief Executive Officer Keith Creel. “By combining, we will unlock the full potential of our networks and our people while providing industry-best service for our customers. This perfect end-to-end combination creates the first U.S.-Mexico-Canada rail network with new single-line offerings that will deliver dramatically expanded market reach for CP and KCS customers, provide new competitive transportation options and support North American economic growth.”

North Dakota Sens. John Hoeven and Kevin Cramer and Congressman Kelly Armstrong issued the following statement after the announcement of the deal.

“This merger will create the first railroad connecting Canada, Mexico and the United States, opening access to new markets in Mexico for North Dakota producers, while also providing a more direct route to markets in the southern United States. This in turn will increase competition and help our agricultural producers continue to provide the highest quality, lowest cost food supply in the world, while also contributing to our nation’s energy independence,” the delegation said.

While remaining the smallest of six U.S. Class 1 railroads by revenue, the combined company would have a much larger and more competitive network, operating about 20,000 miles of rail, employing close to 20,000 people and generating total revenues of about $8.7 billion based on 2020 actual revenues. The CP-KCS combination is expected to create jobs across the joined network. Additionally, the companies expect efficiency and service improvements.

Last May, the federal Surface Transportation Board approved the use of a voting trust for a planned CP-KCS merger. The transaction requires approval from shareholders of both companies and Mexican regulatory approvals. CP would then acquire KCS and place the KCS shares into the voting trust.

The Surface Transportation Board’s review of CP’s proposed control of KCS is expected to be completed in the second half of 2022. Upon obtaining control approval, the two companies would fully integrate over the ensuing three years.