friscobob
August 29th, 2003, 07:36 PM
Dow Jones Business News
Kansas City Southern Takes Legal Aim At Mexico's TMM
Thursday August 28, 11:08 am ET
NEW YORK (Dow Jones)--Kansas City Southern said it will deliver a notice of dispute to Mexico's Grupo TMM SA as the battle for control of TMM's prized railway unit heats up.
In a press release late Wednesday, the Missouri-based railroad company said the written notice will initiate a 60-day negotiation period between KCS and TMM, under a dispute resolution mechanism included in the original acquisition agreement.
TMM management agreed in April to sell to KCS its railway unit Transportacion Ferroviaria Mexicana, or TFM, for $412 million in cash and stock, including a 22% stake in the new company, NAFTA Rail.
But TMM shareholders, including controlling shareholder and company Chairman Jose Serrano, voted against the transaction last week, throwing the deal to create a cross-border rail giant into disarray.
KCS said Wednesday if the dispute isn't resolved within 60 days, it intends to initiate a binding arbitration in accordance with the terms of the agreement.
"KCS is continuing its efforts to make NAFTA Rail a reality," the company stated in its press release.
KCS currently has a 37% stake in TFM, which carries more than 40% of Mexico's rail cargo. TFM's tracks lead to Laredo, Texas, a major springboard for U.S.- Mexican traffic.
KCS said the original acquisition agreement remains valid through Dec. 31, 2004, and that it has a right of first refusal regarding the sale of TMM's railway unit.
"As KCS has noted previously, it will enforce its rights and will pursue all appropriate legal or administrative actions against any person or entities involved in interfering with KCS and its agreements with TMM," it added.
TMM didn't give specific reasons for voting down the asset sale earlier this month. Analysts, though, speculate TMM management has balked at the terms amid growing optimism over the resolution of a tax dispute between TFM and Mexican authorities.
The tax dispute dates back to 1997. According to company officials, a favorable ruling could result in a tax rebate of more than $1 billion if interest penalties are included.
TMM, saddled with around $500 million in debt, defaulted on bond payments in May after failing to win support from creditors on a restructuring plan.
Kansas City Southern Takes Legal Aim At Mexico's TMM
Thursday August 28, 11:08 am ET
NEW YORK (Dow Jones)--Kansas City Southern said it will deliver a notice of dispute to Mexico's Grupo TMM SA as the battle for control of TMM's prized railway unit heats up.
In a press release late Wednesday, the Missouri-based railroad company said the written notice will initiate a 60-day negotiation period between KCS and TMM, under a dispute resolution mechanism included in the original acquisition agreement.
TMM management agreed in April to sell to KCS its railway unit Transportacion Ferroviaria Mexicana, or TFM, for $412 million in cash and stock, including a 22% stake in the new company, NAFTA Rail.
But TMM shareholders, including controlling shareholder and company Chairman Jose Serrano, voted against the transaction last week, throwing the deal to create a cross-border rail giant into disarray.
KCS said Wednesday if the dispute isn't resolved within 60 days, it intends to initiate a binding arbitration in accordance with the terms of the agreement.
"KCS is continuing its efforts to make NAFTA Rail a reality," the company stated in its press release.
KCS currently has a 37% stake in TFM, which carries more than 40% of Mexico's rail cargo. TFM's tracks lead to Laredo, Texas, a major springboard for U.S.- Mexican traffic.
KCS said the original acquisition agreement remains valid through Dec. 31, 2004, and that it has a right of first refusal regarding the sale of TMM's railway unit.
"As KCS has noted previously, it will enforce its rights and will pursue all appropriate legal or administrative actions against any person or entities involved in interfering with KCS and its agreements with TMM," it added.
TMM didn't give specific reasons for voting down the asset sale earlier this month. Analysts, though, speculate TMM management has balked at the terms amid growing optimism over the resolution of a tax dispute between TFM and Mexican authorities.
The tax dispute dates back to 1997. According to company officials, a favorable ruling could result in a tax rebate of more than $1 billion if interest penalties are included.
TMM, saddled with around $500 million in debt, defaulted on bond payments in May after failing to win support from creditors on a restructuring plan.