(Reuters circulated the following article on August 25.)
MEXICO CITY — Mexican transport company Grupo TMM on Monday called off its agreement to sell its stake in Mexico’s largest railroad operator, but spurned buyer Kansas City Southern KSU.N is not taking no for an answer.
Grupo TMM on Monday said it had it had notified Kansas City Southern of its termination of a $412 million deal to sell its interest in Grupo Transportacion Ferroviaria Mexicana (TFM) to the U.S. company. TMM shareholders last week rejected the agreement.
Debt-laden TMM TMMA.MX TMM.N had planned to use the funds from the sale of the TFM stake to repay $177 million in defaulted debt.
The Mexico City-based company on Monday said its board of directors “directed management to pursue all reasonable alternatives to restructure Grupo TMM’s outstanding indebtedness and improve the company’s financial profile.”
But Kansas City, Missouri-based Kansas City Southern insisted the agreement is valid, even though a majority of shares were voted against it.
“Our lawyers believe that the transaction agreement is valid and still in effect and we are exploring our legal options to enforce that agreement,” Warren Erdman, the U.S. railroad operator’s vice president of corporate affairs, told Reuters.
TMM is obliged to follow through with the agreement because it was signed by Jose Serrano, who is TMM’s chairman and largest shareholder, Erdman contended.
TFM, which owns a concession to operate through 2047 the only Mexican freight line to Laredo, Texas, is 41 percent owned by Grupo TMM, 39 percent owned by Kansas City Southern and 20 percent owned by the Mexican government.
The Mexico-Laredo line is the busiest U.S.-Mexican rail freight operation, carrying 40 percent of Mexico’s rail cargo.
Analysts said the rejection of the sale might reflect TMM shareholders’ belief that they can win a $950 million claim against the Mexican government for tax rebates, allowing TMM to cover its debt.
In afternoon New York Stock Exchange trading, TMM shares were off 3 cents to $2.72 and Kansas City Southern shares were off 12 cents to $11.90. (Additional reporting by Gabriel Moreno)