The battle to form North America’s first end-to-end rail network is heating up.

Kansas City Southern rejected Canadian Pacific’s merger offer and accepted a more lucrative deal proposed by Canadian National.

KCS’s Board of Directors announced last week that CN’s $33.6 billion offer, which came a few weeks after receiving an offer from CP to buy the nation’s smallest Class I railroad, constitutes a superior proposal. The board voted to terminate CP’s $29 billion proposal, which pitched forming a seamless Canada-U.S.-Mexico network, and accept a similar offer by CN.

Under the terms of the CN merger agreement, upon closing each share of KCS common stock will be exchanged for $200 in cash and 1.129 shares of CN common stock. Closing will be subject to customary conditions, including KCS stockholder approval and approval by the Surface Transportation Board of CN’s proposed voting trust.

Canadian National announced this week an offer to acquire Kansas City Southern in a cash-and-stock transaction valued at $33.7 billion, or $325 per share. The offer, submitted in a letter to KCS’s board of directors, follows a $29 billion offer from Canadian Pacific Railway in March to buy the nation’s smallest Class I railroad.

Under the terms of the proposal, following closing into a voting trust, KCS shareholders will receive $200 in cash and 1.059 shares of CN common stock for each KCS common share. Based on the March 19, 2021, closing price of CN shares, CN’s proposal is valued at $325 per KCS share.

The offer represents a 21% improvement over the current value of KCS’ agreement with CP, CN said in a release.

In the proposal submitted to KCS’s board of directors, CN President and CEO JJ Ruest said combining the companies offers greater choice and efficiencies for customers. He added that CN has long admired KCS’s customer-focused vision and commitment to safety, service and performance.

Canadian Pacific Railway is acquiring Kansas City Southern for $29 billion (USD) in stock and cash, creating North America’s first rail network connecting Canada, the U.S. and Mexico, the companies announced Sunday.

The new company will be called Canadian Pacific Kansas City (CPKC).

While remaining the smallest of six U.S. Class 1 railroads by revenue, the combined company will be much larger and more competitive, operating approximately 20,000 miles of rail, employing close to 20,000 people and generating revenues of approximately $8.7 billion based on 2020 numbers.

The deal values KCS shares at $275 each — 23 percent above Friday’s close — and is subject to approval of the U.S. Surface Transportation Board. CP will assume $3.8 billion in KCS outstanding debt, valuing the deal at $25 million.