Boosting the Mexico U.S. Rail Corridor

Mexico’s railroad company, Transportación Ferroviaria Mexicana, (TFM) has decided to sell its 51% ownership of its Mexico City - Nuevo Laredo railroad to Kansas City Southern. Previously, TFM had sold their share in Mexrail Inc., which links Texas to Mexico through Laredo.

An announcement by the two already operating partners says that KCS will sell its 51% voting stock for $200 million in cash, $18 million in shares of KCS common stock, $47 million in a two-year promissory note, and as much as $110 million, payable in a combination of cash and KCS stock.

The deal brings to an end a two-year feud that tied up both companies in courts. At the completion of this transaction, both companies will drop charges against each other in different courts.

Chief executives of the two companies, Michael R. Haverty of KCS and José Serrano of TFM were pleased with the outcome.

“This deal will enhance rail competition and give shippers in the NAFTA trade corridor a strong transportation alternative,” Says Haverty said.

Serrano added that despite losing a majority vote, his umbrella company, Transportacion Maritima Mexicana, (TMM), “will continue to benefit from significant ownership in this valuable franchise.”

Although KCS is now the majority shareholder with about 69% of TFM, the Mexican government will retain its 20% strategic share of ownership in this already very profitable railroad line.