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On Aug. 29, Kansas City Southern acknowledged receiving a letter from Grupo TMM S.A. stating subsidiary TFM S.A. de C.V.'s plan to repurchase 51 percent of Mexrail Inc. shares TMM sold to KCS in May 2003.

"Our legal team is reviewing it," said Warren Erdman, KCS vice
president of corporate affairs, in a prepared statement. "We will respond to this notice within the required timeframe, but this does not change our position that we have a valid agreement in place to acquire TFM. As previously announced, we plan to assert our legal rights to enforce that agreement."

Under terms of a stock-purchase agreement reached in April, TFM retained the right to repurchase the Mexrail shares. The purchase price would be $32.6 million — the same amount TFM received from KCS in May.

The shares currently are in a trust pending Surface Transportation Board's decision on KCS' plan to commonly control The Texas Mexican Railway Co., which is owned by Mexrail. KCS plans to place The Kansas City Southern Railway Co., Tex Mex, TFM and Gateway Eastern Railway Co. under the common control of new Kansas City, Mo.-based holding company NAFTA Rail.

KCS also acknowledged receiving from TMM a notice to terminate a joint 1995 agreement.

"We have had problems in the past with TMM's compliance with this agreement," said Erdman. "We will deal with these issues at the appropriate time as part of our effort to compel TMM to honor its contractual obligations."