New $25 billion deal will create the first Canada-US-Mexico railroad

The railway group Canadian Pacific announced on Sunday that it has agreed to buy Kansas City Southern for about $25 billion, Reuters reports.

Why it matters: The acquisition would create the first railroad network to connect the U.S., Canada, and Mexico and open up opportunities for increased trade.

• The new USMCA trade agreement, which replaced NAFTA, went into effect last year will likely increase manufacturing and agriculture trade, adding more certainty to the rail deal, per Reuters.

What they're saying: Patrick Ottensmeyer, Kansas City Southern's chief executive, said the deal could reduce the need for trucks to connect production sites, reports the Wall Street Journal.

• “This company is going to have a North America rail footprint that is truly unmatched,” Ottensmeyer added.

What's next: The deal still awaits the approval of the U.S. Surface Transportation Board, which has not looked favorably upon previous attempts by Canadian railroad companies to buy U.S. rail companies, per Reuters.

• The STB review is expected to finish by mid-2022.