(Kansas City Southern issued the following news release on May 9.)
KANSAS CITY, Mo. — Kansas City Southern (KCS) and Grupo TMM, S.A. (Grupo TMM) today announced that in accordance with the Mexrail Stock Purchase Agreement entered into on April 20, 2003, KCS has completed the purchase of 51% of the Mexrail stock from TFM, S.A. de C.V. (TFM). KCS has placed the stock into an Independent Voting Trust pending approval by the U.S. Surface Transportation Board (STB) of KCS’s common control of the Texas Mexican Railway Company (Tex-Mex; Mexrail’s wholly owned subsidiary), The Kansas City Southern Railway Company (KCSR), and the Gateway Eastern Railway Company (GWER).
Kansas City Southern already indirectly owned a significant minority interest in Mexrail through its ownership interest in TFM, which had wholly owned Mexrail before this transaction. As a result of today’s transaction, KCS will own 51% of Mexrail, but its controlling ownership will be in trust pending approval by the STB of the common control application. KCS holds an option to acquire the remaining 49% of Mexrail from TFM. KCS anticipates filing its common control application soon.
As previously announced, KCS paid $32,680,000 for the Mexrail shares. The purchase was financed by KCS from its existing cash.
Thomas F. Power, Jr., former president and chief executive officer of the Wisconsin Central Transportation Corporation, has been named as trustee of the Independent Voting Trust and will exercise control over Mexrail and Tex-Mex until the trust is dissolved and KCS has received approval by the STB of its common control application. James Riney will continue as Tex-Mex general manager.
KCS believes that the transaction should be treated as a “minor” transaction under current STB procedures, since it only involves common control of a Class I (KCSR), Class II (Tex-Mex) and
Class III (GWER) carrier in an end-to-end manner, with no reductions in the number of carriers serving any customers.
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.
Headquartered in Mexico City, Grupo TMM is the premier Mexican multimodal transportation company and logistics provider. Through its branch offices and network of subsidiary companies, Grupo TMM provides a dynamic combination of ocean and land transportation services within Mexico. Grupo TMM also has the controlling interest in TFM, which operates Mexico’s Northeast Rail Lines and carries over 40 percent of the country’s rail cargo.
Included in this press release are certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are based on the beliefs of the Companies’ managements as well as on assumptions made. Actual results could differ materially from those included in such forward-looking statements. Readers are cautioned that all forward-looking statements involve risks and uncertainty. The following factors could cause actual results to differ materially from such forward-looking statements: global, US and Mexican economic and social conditions; the effect of the North American Free Trade Agreement on the level of US-Mexico trade; the condition of the world shipping market; the success of the Companies’ investment in TFM, S.A. de C.V. and other new business risks. These risk factors and additional information are included in Grupo TMM’s and KCS’ reports on file with the Securities and Exchange Commission.