(Kansas City Southern issued the following news release on August 16.)
KANSAS CITY, Mo. — Grupo TMM, S.A. (TMM) (NYSE:TMM) and Kansas City Southern (KCS) (NYSE:KSU) today announced an agreement for TFM, S.A. de C.V. (TFM) to sell to KCS, Mexrail, Inc. (Mexrail) shares representing a 51 percent ownership of Mexrail for approximately $32.7 million (U.S.). The sale will close today. KCS will repay to TFM on or before January 1, 2005, certain advances from TFM in an amount of approximately $9 million and will pay to Grupo TMM at the closing outstanding payables of approximately $400,000.
The sale will be made on terms substantially similar to those previously agreed to by the parties in April of 2003. Mexrail wholly owns The Texas-Mexican Railway Company (Tex-Mex), a U.S. based shortline railroad that connects The Kansas City Southern Railway Company (KCSR) with TFM, Mexico’s largest railroad by volume. The Mexrail shares will be placed in a voting trust pending regulatory approval by the Surface Transportation Board (STB) of KCS’s common control of Tex-Mex, KCSR, and the Gateway Eastern Railway Company.
“KCS is very pleased to have completed the Mexrail transaction and to have it before the STB again for approval,” said Michael R. Haverty, Chairman, President and CEO of Kansas City Southern. “Obtaining control of Mexrail and its U.S.-based assets under KCS strengthens KCS as a viable rail competitor in the cross-border market.”
“Approval of the Mexrail transaction will make KCS, our TFM partner, a stronger second U.S. rail carrier to the border at Laredo, and will be highly beneficial for TMM,” said Jose Serrano, Chairman and CEO of TMM. “We are pleased to have completed this transaction.”
Under the agreement, KCS has an exclusive option to purchase the remaining 49 percent of Mexrail through October 31, 2005, and an absolute obligation to purchase those shares on or before October 31, 2005. KCS agrees to comply with all prior STB rulings concerning the international bridge between Laredo and Nuevo Laredo (the Bridge), and to operate the Bridge under the terms of the applicable bridge agreements and protocols.
KCS’s acquisition of control of Tex Mex is subject to the approval of the STB. KCS had previously submitted an application to control Tex Mex, but that proceeding was suspended by the STB on October 8, 2003, following TFM’s repurchase of the Mexrail shares from KCS under the terms of the April 2003 agreement. KCS has notified the STB of the new agreement and has requested the STB to reinstate the procedural schedule and to move forward with its consideration of KCS’s application to control Tex Mex.
Headquartered in Mexico City, TMM is a Latin American multimodal transportation company. Through its branch offices and network of subsidiary companies, TMM provides a dynamic combination of ocean and land transportation services. TMM also has a significant interest in TFM, S.A. de C.V., which operates Mexico’s Northeast railway and carries over 40 percent of the country’s rail cargo. Visit TMM’s web site at http://www.grupotmm.com and TFM’s web site at http://www.tfm.com.mx. Both sites offer Spanish/English language options. Grupo TMM is listed on the New York Stock Exchange under the symbol “TMM” and Mexico’s Bolsa Mexicana de Valores under the symbol “TMM A.”
KCS is a transportation holding company that has railroad investments in the United States, Mexico and Panama. Its primary holding in the United States is The Kansas City Southern Railway Company. Headquartered in Kansas City, Missouri, KCS serves customers in the central and south central regions of the United States. KCS’s rail holdings and investments are primary components of a NAFTA Railway system that links the commercial and industrial centers of the United States, Canada, and Mexico.