(Reuters circulated the following article on December 15.)
MEXICO CITY — U.S. transport group Kansas City Southern has agreed to buy a controlling stake in Mexico’s busiest railroad in a deal worth at least $550 million, ending a bitter legal dispute with Mexican company TMM.
TMM (TMM.N: Quote, Profile, Research) (TMMA.MX: Quote, Profile, Research) said on Wednesday it was selling its 41 percent stake in railroad group TFM to Kansas City Southern (KCS) for $200 million in cash, 18 million shares and a $47 million two-year promissory note.
A similar deal was first reached in 2003, but TMM backed out, sparking a legal battle between the two companies.
The amended acquisition pact for TFM would help increase rail competition and give shippers moving goods between the United States and Mexico an alternative to trucks, the companies said.
UBS called the acquisition price “a little higher than we had forecast.”
KCS shares moved 0.88 percent higher to $17.10, while TMM’s New York-traded shares rallied 6.86 percent to $3.74.
KCS (KSU.N: Quote, Profile, Research) already has a 39 percent stake in TFM and the new deal would give it full control of the company.
TMM, controlled by Mexico’s Serrano family, has 41 percent of TFM’s equity and 51 percent of the voting rights, a structure often used by Mexican families to retain control of their companies. The Mexican government has the remaining stake.
Both companies’ boards have approved the new deal and a source close to KCS told Reuters the Serrano family’s votes had been guaranteed by placing them in a “voting trust.”
“This trust obliges the controlling shareholders to vote in favor of the transaction,” he said.
KCS and TMM have agreed to dismiss all litigation between the two companies on completion of the deal.
KCS also agreed to pay TMM up to $110 million in cash and stock once separate proceedings related to a tax dispute and a TFM put associated with the Mexican government’s stake in TFM were resolved.
The agreement has been approved by Mexican authorities, the KCS source said.
TMM said the cash proceeds from the deal would be used to reduce its debt.