MEXICO CITY — Mexico’s antitrust body could block a major railroad merger between copper miner Grupo Mexico and industrial conglomerate Grupo Carso, a source at the government’s Federal Competition Commission told a wire service.
“The proposed fusion is not very fair because it would leave one operator with a complete national network,” a source at the commission, known as the CFC, told Reuters.
Grupo Mexico and Grupo Carso announced in January that they would merge their railway units into a company that would be controlled by Grupo Mexico.
Carso, part of the business empire of Mexican tycoon Carlos Slim, would end up with a 20 percent stake in the merged railroad operation, which would control 60 percent of the nation’s rail system.
The merged entity would connect major Gulf of Mexico ports of Veracruz and Coatzacoalcos, Mexico City, and the northern Pacific region of the country.
The CFC source said the commission would make a decision next week. The commission has the last word on the merger, after it receives a recommendation from the Communications and Transport Ministry.
A rival transport company, Transportacion Maritima Mexicana (TMM) (Mexico:TMMA.MX – News), has fought the merger, saying it violates a Mexican law that says no railway operator can have more than 5 percent ownership in any other railway operator.
An analyst who covers Mexico’s transport sector said that even though the merger would create a very extensive railway network, TMM’s railway company TFM would still have more cargo, and so the CFC’s eventual ruling would probably not be based on extension alone.
“Grupo Mexico will be bigger in terms of extension but not in terms of (cargo) density. At the end of the story most of the (cargo) volume is in the northeast (where TFM operates),” said Francisco Suarez, analyst with Mexico’s Banorte brokerage.