KCS shareholders approve TFM purchase

Stockholders at US rail company Kansas City Southern (KCS) have approved the company's 51% purchase share offer of Mexican rail concessionaire Grupo TFM, KCS announced. Under the deal KCS (NYSE: KSU) will pay US$200mn in cash and will provide 18 million shares of KCS common stock, US$47mn in a two-year promissory note, and as much as US$110mn payable in a combination of cash and KCS common stock to buy a controlling interest in TFM from controller Mexican transport conglomerate Grupo TMM (NYSE: TMM). KCS expects to complete the purchase and take control of TFM on April 1, the US company said. The combined KCS-TFM system would exceed 5,300 miles (8,529km) of mainline track and include 2,600 freight cars, 12 intermodal ramps and 13 ports, as well as connections at 180 points with other railways. "With the railroads already physically linked in an end-to-end configuration, common control will enhance competition and give shippers in the NAFTA trade corridor a strong transportation alternative as they make their decisions to move goods between the US, Mexico and Canada," said Michael Haverty, KCS chairman, president and CEO. TFM holds the concession to operate Mexico's Northeast Rail Lines - the first railway to be privatized under Mexico's national development plan - through June 2047, with an option to extend the concession for an additional 50 years. The Mexican railway also provides the primary rail route in northern Mexico linking Mexico City with Laredo, Texas, where over 50% of US-Mexico trade crosses the border. Its 2,661-mile line accounts for 19% of rail in Mexico and carries 40% of the country's total rail cargo. TFM, the operating subsidiary of Grupo TFM, and KCS Railroad will continue as separate corporations, all under the common control - together with the Texas Mexico Railway and the Panama Canal Railway - of the holding company KCS.