Done deal?

Done deal?

Copyright 2003, Traffic World, Inc.

Rail analysts theorized last week that Grupo TMM stockholders'' decision on Aug. 18 to vote down the sale of Mexican railroad TFM to Kansas City Southern could kill KCS''s prospects of becoming a true NAFTA railroad and may be a blow to the railroad''s long-term value.

"In our view, this is a significant negative development for (KCS) because it appears to break the deal in which KCS would have gained control of the Mexican railroad TFM," said Bear Stearns analyst Edward Wolfe in an equity research report. "Without control of TFM, we believe that the major North American railroads would be much less interested in buying KCS, which diminishes the potential upside for KCS stock."

There also was speculation that TMM majority shareholder Jose Serrano believes that conditions have changed since the companies agreed to sell their share of TFM to KCS in April and that the move is a negotiating ploy to get a higher price. As of Aug. 20 the boards of both companies were exploring their options.

"KCS intends to pursue all appropriate legal or administrative action against any persons or entities involved in interfering with KCS and its agreements with TMM," KCS stated last week. "KCS remains committed to completing the transaction."