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KCS seeks Delaware court injunction to 'preserve positions' during dispute-resolution negotiations with TMM

On Sept. 2, Kansas City Southern followed through on a promise to assert its legal rights to enforce existing agreements with Grupo TMM S.A. KCS filed a motion in a Delaware court seeking a preliminary injunction "to preserve the parties' positions" while the Class I tries to resolve its dispute with TMM. KCS requested an expedited hearing.

Under an acquisition agreement, TMM agreed to sell its 38.4 percent stake in TFM S.A. de C.V. to KCS — a major part of the Class I's NAFTA Rail plan. But on Aug. 19, TMM shareholders — led by majority stockholders TMM chairman Jose Serrano and TMM CEO Javier Segovia — rejected the deal.

On Aug. 29, KCS delivered to TMM a formal notice of dispute, which initiates arbitration procedures if the parties are unable to negotiate a settlement.

KCS' motion alleges that TMM breached the acquisition agreement and seeks a court order requiring TMM not to sell TFM, and to preserve the railroad's assets and business while the parties try to resolve the dispute, according to a prepared statement. The agreement provides KCS a "right of first refusal" regarding any sale of TMM's TFM interest, KCS said.

The acquisition agreement does not allow a negative shareholder vote as a basis for termination, and the agreement remains in effect until Dec. 31, 2004, during which time shareholders might vote differently, KCS officials believe.

Meanwhile, KCS submitted a Surface Transportation Board filing that replies to comments filed Aug. 4 opposing the railroad's plan to acquire control of The Texas Mexican Railway Co. by purchasing Tex Mex owner Mexrail Inc. from TFM. KCS asked the board to proceed with its Tex-Mex transaction review even though TFM recently notified KCS that it intends to repurchase 51 percent of Mexrail Inc. shares sold to KCS in May.

Contact Progressive Railroading editorial staff.

More News from 9/3/2003