Canadian Pacific Railway Ltd. agreed to acquire Kansas City Southern in a merger valued at about $25 billion that would create the first freight-rail network linking Mexico, the U.S. and Canada.

The companies said Sunday their boards agreed to a deal that values Kansas City at $275 a share in a combination of cash and stock. Kansas City investors will receive 0.489 of a Canadian Pacific share CP, -1.37% CP, -1.36% and $90 in cash for each Kansas City KSU common share held.

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