(Kansas City Southern issued the following news release on June 10.)
KANSAS CITY, Mo. — Kansas City Southern (KCS) applauded the decision by the Surface Transportation Board (STB) accepting its application as a minor transaction and outlining a procedural schedule for consideration of KCS’s application to exercise common control over The Kansas City Southern Railway Company, the Gateway Eastern Railway Company and the Texas Mexican Railway Company (Tex-Mex).
KCS had filed its application with the Board on May 14, 2003, and yesterday’s STB decision set October 17, 2003, as the date by which it will issue its final decision on the merits of that application.
“We are very pleased that the STB strongly affirmed our position that this is a minor transaction and will be treated as such as their review process goes forward,” said Warren Erdman, vice president corporate affairs. “We are also pleased with the schedule of proceedings outlined by the STB in this decision and look forward to demonstrating why this transaction will enhance rail competition for cross-border shippers.”
In its decision, the STB acknowledged that the application filed by KCS would be treated as a minor transaction, which means the application must be approved unless opposing parties can demonstrate that the transaction would lessen competition, restrain trade, or create a monopoly. This is a high hurdle for opponents. While the Board also granted parties additional time to prepare their initial comments, KCS had supported that request. In addition, consistent with the STB’s request, KCS will supplement its application with additional information regarding the enhancements to cross-border competition that the transaction would bring to shippers following STB approval.
In its application, KCS is asking for common control authority, which would place Tex-Mex under the control of KCS in an end-to-end transaction that has no adverse competitive effects. Tex-Mex is a 157-mile railroad in south Texas linking the international gateway of Laredo to Corpus Christi, Texas. In addition, the Tex-Mex operates over approximately 380 miles of trackage rights in Texas. KCS has already acquired 51 percent of Mexrail, the holding company for Tex-Mex, and placed those shares in an independent voting trust pending STB approval of the transaction. Mexrail was previously owned by TFM, a Mexican railway in which KCS holds a significant minority interest.
Allowing KCS to have common control over Tex-Mex simply allows KCS to acquire control of the 157-mile railroad, which it already had a significant ownership equity in and allows KCS to compete more vigorously with the other much more dominant rail carriers in the Laredo, Texas, gateway.
KCS is a transportation holding company that has railroad investments in the United States, Mexico and Panama. Its primary holding is The Kansas City Southern Railway Company. Headquartered in Kansas City, Missouri, KCS serves customers in the central and south central regions of the U.S. 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.
In connection with the proposed transaction, the Company will file relevant materials with the SEC, including a proxy statement soliciting shareholder approval of certain actions in connection with the transaction. Shareholders are urged to read the proxy statement, as well as any amendments and supplements to the proxy statement (if and when they become available) and any other relevant documents filed with the SEC, because they will contain important information about the transaction. Shareholders and investors may obtain the proxy statement and any other relevant documents free of charge at the SEC’s Internet web site at www.sec.gov. Shareholders may also obtain free of charge the proxy statement and any other relevant documents by contacting the office of the Corporate Secretary at the Company’s principal executive offices at (816) 983-1538. Written requests should be mailed to P.O. Box 219335, Kansas City, Missouri 64121-9335 (or if by federal express or other form of express delivery to 427 West 12th Street, Kansas City, Missouri 64105). Such proxy statement is not currently available. The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company’s shareholders with respect to approval of certain actions in connection with the transaction. Information regarding these directors and executive officers and their beneficial ownership interests in the Company can be found in the Company’s proxy statement on Schedule 14A, filed with the SEC on April 4, 2003, in connection with the 2003 annual meeting of shareholders. Investors may obtain additional information regarding the interests of such participants by reading the proxy statement filed in connection with the transaction when it becomes available.