Special Edition: From the Desk of Michael R. Haverty, Chairman, President and CEO of Kansas City Southern On Monday, August 18, our Mexican partner, Grupo TMM, S.A., (TMM) announced that TMM shareholders voted against the sale of TMM's interests in Grupo TFM to Kansas City Southern. We were surprised by this announcement because up until we read about TMM's announcement in a news report on Monday, officers of TMM had assured us that shareholder approval was certain. I want you to know that KCS remains committed to this transaction as it was agreed to under the acquisition agreements. We will take the steps necessary to protect our rights under those agreements and exercise any other legal or administrative options that may exist to protect our rights under U.S. and Mexican law. It is important to understand the circumstances that led up to the TMM announcement. In TMM's August 18 press release, it announced that TMM shareholders "unanimously" voted against the sale of TFM to KCS as had been agreed to previously. What TMM's press release did not disclose, and what has not been thoroughly reported, is that the Serrano and Segovia families control the vast majority of TMM stock. TMM's chairman, Jose Serrano and Mr. Serrano's nephew and TMM CEO, Javier Segovia, signed the acquisition agreements on behalf of TMM. They are the same individuals who are obligated under the transaction agreements to recommend approval of the agreements to their shareholders. They are also the same individuals who control the votes of TMM. As such, the two individuals who control the votes of TMM are the same two individuals who were a party to and directly involved in the negotiations between KCS and TFM that lasted over 14 months, resulting in a 55-page comprehensive acquisition agreement which both of them signed. Apparently Messers Serrano and Segovia rejected their own advice and voted against the agreement at Monday's shareholder's meeting. TMM's press release did not explain that Mr. Serrano had the right to vote the Serrano and Segovia family shares. Further leading to our surprise at the TMM actions on Monday was a telephone conversation which took place last Friday, August 15, 2003 between TMM's CEO, Javier Segovia and KCS' assistant to the CEO, Larry Lawrence, wherein Mr. Segovia assured Mr. Lawrence that the upcoming vote would be positive. Knowing that the Serranos and the Segovias control the voting stock of TMM, and knowing that Mr. Serrano had signed the acquisition agreement and recommended it to his shareholders, the vote on Monday not to approve the acquisition is inexplicable. KCS did not learn of Mr. Serrano's or Mr. Segovia's rejection of the acquisition agreement until shortly after the TMM shareholders had rejected the agreement on Monday, August 18. Subsequent to these events, KCS has notified TMM of its intent to move forward with the acquisition agreement and advised them of its intent to exercise all legal and administrative means available to protect its rights under the acquisition agreements. We believe the transaction agreements as agreed to by both parties are still in force and still binding upon the parties. KCS and TMM entered into the negotiations that led to the signing of the acquisition agreements in good faith. Both parties, KCS and TMM, are obligated to exercise good faith efforts to achieve the agreements' approval and the transaction's consummation. KCS has exercised this good faith effort and done all within its means to support the transaction as agreed to by the parties. We will continue to do so. We are gratified that the Mexican Competition Commission has reviewed and approved the transaction as proposed and that the Hart-Scott-Rodino review period by the U.S. Department of Justice has expired without any requests for additional information, allowing the transaction to go forward. We are also grateful for the support that over ninety transportation customers, the 700-member National Industrial Transportation (NIT) League, the U.S. Department of Agriculture and many other interested parties have shown for the NAFTA Rail transaction. NAFTA Rail will be good for both the U.S. and Mexico as it will assure an economically viable rail competitor to provide competition in the highly important NAFTA trade rail corridor. We remain committed to completing the transaction. As events unfold, we will continue to keep you advised. Please feel free to visit our website at www.kcsi.com to follow this matter. Thank you for your interest in and support of Kansas City Southern.
While he points a finger of blame at a couple of specific individuals, he doesn't get into reasons the "shareholders" voted no. I wonder what those reasons might be? Have you seen anything on this? Boxcab E50
