TMM, KCS reach settlement on Mexican rail takeover

TMM, KCS reach settlement on Mexican rail takeover    Mexico’s Grupo TMM, S.A. (TMM) and Kansas City Southern (KCS) have finally reached a settlement on an amended acquisition agreement, after months of dispute that followed their earlier takeover plan announced in 2003.
   Under the latest agreement, TMM will sell its 51 percent voting interest in the Mexican railroad Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (TFM) to KCS for $200 million in cash, 18 million shares of KCS common stock, $47 million in a two-year promissory note, and up to $110 million payable in a combination of cash and KCS common stock upon successful resolution of the current proceedings related to a tax claim with the Mexican government.
   “The boards of directors of both companies have approved the transaction,” TMM and KCS said in a joint statement Wednesday.
   KCS and TMM have also agreed to end all litigation between them. The stalled 2003 takeover agreement had triggered a legal dispute after TMM stockholders rejected the plan.
   The revised takeover agreement remains subject to KCS shareholder approval. TMM’s controlling shareholders have already entered into a voting trust providing for approval of the transaction.
   Both the Mexican Foreign Investment Commission and the Mexican Federal Competition Commission have approved the acquisition of the controlling interest in TFM by KCS. Although KCS and TMM previously satisfied the requirements of the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, that authorization has expired and the parties have agreed to file the required information promptly with the U.S. Department of Justice. This authorization is required prior to consummation of the transaction.
   “We are very pleased to have entered into this amended agreement with TMM, and believe it will enhance rail competition and give shippers in the NAFTA trade corridor a strong transportation alternative in this important and growing trade corridor,” said Michael R. Haverty, chairman, president and chief executive officer of KCS.
   “The combination of KCS and TFM creates an efficient shipping route between the U.S. and Mexico,” said Jose Serrano, chairman and CEO of TMM.
   The takeover will see TMM become a significant shareholder of the enlarged KCS, which has had ambitions to operate a multinational rail network across the North American Free Trade Agreement area.
   TMM and TFM will remain Mexican corporations, with their corporate headquarters located in Mexico City.
   TFM holds the concession to operate Mexico’s Northeast Rail Lines through June 2047, and has the option to extend the concession for an additional 50 years. The TFM rail network consists of more than 2,600 miles of mainline track.