Kansas City Southern surges 14% after Canadian Pacific Railway agrees to buy it for $25 billion

• Kansas City Southern rises Monday following a $25 billion merger deal with Canadian Pacific Railway
• The transaction will create the first rail network to run through Canada, the US and Mexico
• The combined company will operate 20,000 miles of rail and generate about $8.7 billion in revenue.

Shares of Kansas City Southern jumped Monday following the railway operator's deal to be purchased by Canadian Pacific Railway for $25 billion, with the transaction set to create the first rail network that spans North America.

The transaction, announced Sunday, values Kansas City Southern at $275 per share, representing a 23% premium from Friday's closing price of $224.16. The deal has a $25 billion valuation less outstanding debt and assigns Kansas City Southern an enterprise value of $29 billion.

Kansas City Southern shares climbed 14% to $255.93 as the trading session got underway. US-listed shares of Canadian Pacific Railway fell by 1.7% to $371.99.

Kansas City Southern shareholders will receive 0.489 shares of Canadian Pacific and $90 in cash for each share held of KCS.

The deal upon final approval from the Surface Transportation Board would result in the first rail network connecting the U.S., Mexico, and Canada. The combined company will run 20,000 miles of rail and generate total revenue of about $8.7 billion, the companies said in a joint statement.

The single rail system will connect ports on the U.S. Gulf, Atlantic and Pacific coasts with key overseas markets, they added.