Mexican railroad owners nix KCS acquisition
Kansas City Southern’s deal to gain control of Mexico’s main railroad to the United States continued to unravel Friday as Grupo TMM notified its American partner that it also changed its mind about going forward with the sale of its stake in Mexrail Inc., a connector line in Texas.
Late last month, Mexican transportation and logistics conglomerate Grupo TMM pulled out of a deal that would have allowed Kansas City Southern to increase its stake in TMM’s railway, Transportacion Ferroviaria Mexicana, from 37 percent to 76 percent for about $412 million in cash and stock equity in a reorganized KCS company to be called Nafta Rail.
Analysts speculate TMM sought to void the sale after it determined it could win a claim to receive a tax refund potentially worth $950 million from the Mexican government. The payment would more than cover TMM’s $177 million in overdue bond payments and negated the need to generate cash by selling TFM.
On Monday, however, the Mexican government said it will ask Grupo TMM to prove it paid the taxes that it seeks to be refunded, according to Reuters.
TMM said it plans to buy back the 51 percent of Mexrail Inc. it sold to KCS for $32.9 million in April. According to the agreement, the proceeds were placed in a trust pending approval of the deal by the U.S. Surface Transportation Board. Mexrail owns The Texas Mexican Railway Co., which operates from Laredo to Corpus Christi in Texas and over track rights to Beaumont, Texas, where it connects with Kansas City Southern.
KCS has said it will continue to negotiate to resolve the dispute and if not successful will pursue binding arbitration to try and achieve its goal of a unified North-South railroad.