(The following article by Santiago Perez was posted by Down Jones Newswire on April 24.)
MEXICO CITY –Mexican senators have agreed to call top government officials and regulators to testify about Kansas City Southern’s proposed acquisition of a controlling stake in Mexico’s main rail corridor for shipping goods to and from the U.S.
The Senate said late Wednesday that the opposition Revolutionary Institutional Party, or PRI, which has the majority in Mexico’s upper house of Congress, summoned Transport and Communications Minister Pedro Cerisola.
The PRI has also summoned Fernando Sanchez Ugarte, Mexico’s top antitrust regulator.
Both officials will be required to explain “the intended sale of one of the country’s top rail and port companies to foreigners,” the Senate said in a press release.
Under terms of the proposed deal, which has to clear regulatory hurdles on both sides of the border, KCS and Mexico’s Grupo TMM railway assets will be merged into a single company, to be called NAFTA Rail.
KCS has agreed to give TMM $200 million in cash and a 22% stake in NAFTA Rail in return for TMM’s 39% stake in its rail unit, TFM.
KCS currently has a 37% stake in TFM, which is the country’s top rail line, carrying more than 40% of Mexico’s rail cargo through Laredo, Texas, one of the world’s busiest border crossings.
Grupo TMM also unveiled last week plans to sell its maritime ports and terminals for around $120 million as part of an effort to pay down debt.
The Senate said the NAFTA Rail plans form part of a “legitimate decision of two partner rail companies.” However, the merger plan gives control to the U.S. company, “putting in risk a concession that was granted by the Executive Branch to Mexican businessmen.”
Foreign ownership on Mexico’s rail lines is restricted to 50%. KCS’s planned acquisition stems from a 1995 joint venture with TMM that secured the rights to the Northeast Railway, after the Mexican government privatized it in 1997.
Grupo TMM is expected to submit its proposal on the new ownership structure later this week, according to government officials. The final authorization on foreign ownership lies with the Economy Ministry’s foreign investment department.
KCS executives said this week that regulatory approval could take about three to four months in Mexico and six to 12 months in the U.S.