Canadian National Railway Co. enters the right-of-way with a merger offer for Kansas City Southern.

The Montreal-based Class I railroad is offering $200 in cash and 1.059 shares of Canadian National stock (NYSE: CNI) for each Kansas City Southern share (NYSE: KSU), according to a Tuesday release. That will give KC Southern shareholders ownership of about 11% of Canadian National's outstanding stock.

The cash-and-stock transaction also includes assuming $3.8 billion in outstanding Kansas City Southern debt, bringing the proposed deal's enterprise value to approximately $33.7 billion.

The combination with Canadian Pacific Railway Ltd.'s much bigger competitor "delivers greater value and certainty to KCS shareholders, as well as participation in the significant upside of the combined company," according to the release.

Kansas City Southern acknowledged receiving the unsolicited proposal. In a release, the company said its board will evaluate the proposal and had not yet made any determination with respect to the offer.

As of close of business Monday, Canadian National's market cap was $83.8 billion. Canadian Pacific's market cap was just $48.5 billion, while Kansas City Southern's market cap was $23.3 billion.

Canadian Pacific (NYSE: CP) and Kansas City Southern previously said its transaction had an enterprise value of approximately $29 billion. The new proposal increases the enterprise value by about 16%.