(The following article by Randolph Heaster was posted on the Kansas City Star website on March 15.)
KANSAS CITY — Kansas City Southern said it has made $70 million in payments to its former Mexican partner after a $1.2 billion settlement of a tax dispute with the Mexican government.
Kansas City Southern paid Grupo TMM $35 million in cash and $35 million in stock. The railroad company also deposited in escrow a $40 million note payable to TMM on or before April 1, 2010. The note can be converted into stock or cash, and the amount can be reduced subject to the agreement.
Kansas City Southern acquired TMM’s interest in Mexico’s biggest railroad, now called Kansas City Southern de Mexico, last April. However, TMM remained a party with Kansas City Southern in the dispute with the government, which had a stake in the Mexican railroad.
Kansas City Southern acquired the government’s remaining interest in KCSM as part of its settlement with the government last September. While the settlement was valued at $1.2 billion no cash changed hands. Kansas City Southern received the government’s stake in the railroad in exchange for dropping its tax claim against Mexico.
The payment to TMM covers its interest in the dispute and was made because no appeals or other claims have been made in the past six months.
The resolution led to Kansas City Southern paying $9 million to consulting firm Jose F. Serrano International Business S.A. de C.V. Serrano is TMM chairman.