TMM sells railroad.

The completion of a genuine Nafta railroad finally seems to be getting on track.

Grupo TMM, S.A., and Kansas City Southern (KCS) finalized an agreement for KCS to acquire controlling interest in Mexrail, which will connect the Kansas City Southern Railway Company with TFM, Mexico's largest railroad by volume.

TMM has a significant interest in TFM, S.A. de C.V., which operates Mexico's Northeast railway and carries over 40 percent of the country's rail cargo.

BusinessWire.com reported that TFM will sell shares representing a 51 percent ownership of Mexrail for approximately US$32.7 million. KCS will repay to TFM on or before Jan. 1, 2005, certain advances from TFM in an amount of approximately US$9 million and will pay to Grupo TMM at the closing outstanding payables of approximately US$400,000.

The sale will be made on terms very similar to those previously agreed to by the parties in April 2003. Mexrail wholly owns The Texas-Mexican Railway (Tex Mex), a U.S. based shortline railroad that connects The Kansas City Southern Railway Company (KCSR) with TFM.

"KCS is very pleased to have completed the Mexrail transaction and to have it before the STB again for approval," said Michael R. Haverty, Chairman, President and CEO of Kansas City Southern. "Obtaining control of Mexrail and its U.S.-based assets under KCS strengthens KCS as a viable rail competitor in the cross-border market."

"Approval of the Mexrail transaction will make KCS, our TFM partner, a stronger second U.S. rail carrier to the border at Laredo, and will be highly beneficial for TMM," Jose Serrano, Chairman and CEO of TMM told BusinessWire.com. "We are pleased to have completed this transaction."

Under the agreement, KCS has an exclusive option to purchase the remaining 49 percent of Mexrail through Oct. 31, 2005. KCS' acquisition of control of Tex Mex is subject to the approval of the Surface Transportation Board (STB). KCS had previously submitted an application to control Tex Mex, but that proceeding was suspended by the STB on Oct. 8, 2003, following TFM's repurchase of the Mexrail shares from KCS under the terms of the April 2003 agreement. KCS has notified the STB of the new agreement and has requested the STB to reinstate the procedural schedule and to move forward with its consideration of KCS' application to control Tex Mex, BusinessWire.com reported.

Headquartered in Mexico City, TMM is a Latin American multimodal transportation company. KCS is a transportation holding company that has railroad investments in the United States, Mexico and Panama. Its primary holding in the United States is The Kansas City Southern Railway Company. Headquartered in Kansas City, Mo., KCS serves customers in the central and south central regions of the United States. KCS' rail holdings and investments are primary components of a Nafta Railway system that links the commercial and industrial centers of the United States, Canada, and Mexico.

--T.B.