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Another day, another twist in the KCS, TMM 'NAFTA Rail' story

Grupo TMM S.A. landed another blow in its recent punch, counter-punch fight with Kansas City Southern over control of TFM S.A. de C.V. On Aug. 29, TMM announced that subsidiary TFM notified KCS of its plan to repurchase 51 percent of Mexrail Inc. shares that TMM sold to KCS in May.

The shares currently are being held in a voting trust pending a Surface Transportation Board decision on KCS' application to assume control of Mexrail.

Under terms of a stock-purchase agreement reached in April, TFM retained the right to repurchase the Mexrail shares. The purchase price of $32.6 million — the same amount TFM received from KCS in May — will be paid from TFM's existing cash balances, according to a prepared statement.

Once the transaction is completed Sept. 4 — the fifth business day after TFM exercises its repurchase right per the April agreement — TFM again would own 100 percent of Mexrail shares.

Holding company Mexrail owns The Texas Mexican Railway Co. KCS plans to place The Kansas City Southern Railway Co., TFM, Tex Mex and Gateway Eastern Railway Co. under the common control of NAFTA Rail, a new Kansas City, Mo.-based holding company.

However, TMM shareholders recently rejected KCS' proposal to purchase TMM's 38.4 percent stake in TFM. Yesterday, KCS announced plans to deliver to TMM a notice of dispute, which will initiate a 60-day negotiation period to re-address the transaction. If the parties are unable to reach an agreement within that time period, KCS intends to initiate binding arbitration.

Contact Progressive Railroading editorial staff.

More News from 8/29/2003