(The Kansas City Star posted the following article by Randolph Heaster on its website on September 3.)
KANSAS CITY — Kansas City Southern took legal action Tuesday seeking to preserve the status quo while trying to settle the disputed sale of Mexico’s biggest railroad.
In a Delaware state court, Kansas City Southern filed a motion for a preliminary injunction against Grupo TMM, a Mexican transportation company.
In April, TMM agreed to sell Kansas City Southern its stake in Grupo TFM, the railroad in northeast Mexico. The two have jointly operated the railroad since 1997, but Kansas City Southern was seeking to take control of TFM to create Nafta Rail, a 6,000-mile railroad running from Chicago to Mexico City.
But last month, the controlling shareholders of TMM voted to reject the $412 million sale of its interest in TFM, triggering a bitter fight between Kansas City Southern and TMM.
TMM contends the sale is off, Kansas City Southern maintains that its acquisition agreement remains valid.
In its motion in court, Kansas City Southern said it sought to prevent TMM from doing anything to diminish TFM’s value, such as committing the railroad to “extraordinary” contracts. In addition, the motion wants to prohibit TMM from interfering with the process of obtaining governmental approvals for the sale.
A TMM spokesman could not be reached late Tuesday afternoon.
Last week, Kansas City Southern said it was activating a provision in its acquisition agreement that could lead to an arbitrator’s eventually hearing the dispute. Meanwhile, TMM last week said Mexico’s government agency that must approve the TFM sale had terminated its review because TMM shareholders rejected the proposed transaction.
TMM Chairman Jose Serrano, who negotiated the TFM sale to Kansas City Southern, and his family are the controlling shareholders of TMM stock. TMM’s vote to reject the sale came shortly after a Mexican court ruled that the TFM railroad is entitled to a tax refund that may total more than $800 million.