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KCS' board blesses legal action to enforce TFM deal with TMM


On Sept. 23, Kansas City Southern's board passed a resolution instructing railroad executives to pursue all legal means to enforce provisions of an acquisition agreement with Grupo TMM S.A. involving TMM's stake in TFM S.A. de C.V., as well as continue negotiations with TMM.

"The board affirmed its commitment to the NAFTA Rail transaction and in enforcing the acquisition agreement as it was agreed to and signed by the parties back in April," said KCS Vice President of Corporate Affairs Warren Erdman in a prepared statement.

TMM had agreed to sell its 38.4 percent stake in TFM to KCS — a major part of the Class I's NAFTA Rail plan — but TMM shareholders, led by majority stockholders TMM chairman Jose Serrano and TMM CEO Javier Segovia, rejected the deal last month.

On Aug. 29, KCS submitted a dispute notice to TMM, initiating a 60-day negotiation period. If the parties are unable to resolve their dispute by the end of October, KCS intends to initiate binding arbitration.

The acquisition agreement still is valid and in effect until Dec. 31, 2004, KCS officials believe. On Sept. 2, KCS filed a complaint in the Delaware Court of Chancery seeking a preliminary injunction to preserve the parties'
positions during negotiations.

Also on Sept. 23, Surface Transportation Board decided it will not need to rule on TFM's request to reacquire its 51 percent Mexrail Inc. interest KCS acquired May 9. The decision enables TFM to reacquire the shares in accordance with an agreement with KCS, which will abide by the agreement, KCS officials said.

Contact Progressive Railroading editorial staff.

More News from 9/24/2003