(The Associated Press distributed the following article on August 19.)
MEXICO CITY — Shareholders of Grupo TMM SA, Mexico’s largest transport company, have rejected the proposed sale of its railway unit to the U.S. rail company Kansas City Southern, the Mexican firm said Monday.
The rejection ends plans to create the principal rail corridor for shipping goods to and from the U.S.
TMM said in a filing with the Mexican Stock Exchange that shareholders voted unanimously against the planned sale of its Transportacion Ferroviaria Mexicana, or TFM, rail unit.
In April, KCS agreed to buy TMM’s railway assets for $200 million and create a new company, NAFTA rail, in which TMM would hold a 22 percent stake. KCS currently has a 37 percent stake in TFM.
TMM’s shareholders voted at a meeting earlier Monday against the recommendation from the company’s management and its board of directors.
After the announcement, TMM class A shares rose 16.4 percent to 29.10 pesos in trading on the Mexican Stock Exchange.
“Shareholders considered that the risk factors linked to the operation were growing after the contract was signed,” said company spokesman Marco Provencio. “The shareholders considered that it wasn’t in their best interest to proceed with the acquisition agreement.”
Earlier this month, the company told shareholders that there were disagreements with KCS, and several risks linked to the creation of NAFTA Rail.
The disagreements centered on alleged communications that KCS representatives sent to the Mexican government regarding its willingness to buy the government’s 20 percent stake in TFM, and fears that TMM shareholders could lose a potential tax rebate.
The government has a put option for its minority stake in the railway company, which can be exercised Oct. 31 for $475 million.
TMM stood to lose between $100 million and $175 million if a tax rebate were to be resolved favorably for TFM after the government sold its stake.
In a statement late Monday, KCS said it will study all legal options, and remains committed to completing the deal.
Analysts held out hopes for a new agreement between TMM and KCS.
The government has a put option for its minority stake in the railway company, which can be exercised Oct. 31 for $475 million.
Such a transaction could affect TMM’s shares, according to a company letter to shareholders dated Aug. 4.
KCS officials couldn’t immediately be reached for comment.
TMM, saddled with around $500 million in debt, defaulted on bond payments in May as creditors balked at a restructuring plan.
Provencio said the $18 million break-up fee in the agreement with KCS wouldn’t apply in this case.
Under the agreement, the fee would only apply in the event of a shareholder rejection if the company management recommended against the deal, or withdrew its recommendation.