SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a party other than the registrant ¨
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¨ Preliminaryproxy statement |
¨ Confidential, for use of the Commission Only(as permitted by Rule 14a-6(e)(2)) | |
¨ Definitive proxy statement |
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¨ Definitive additional materials |
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x Soliciting material under Rule 14a-12 |
KANSAS CITY SOUTHERN
(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) | Title of each class of securities to which transaction applies: |
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
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¨ Fee paid previously with preliminary materials.
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transaction summary
NAFTA Rail
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NAFTA Rail will be a U.S. corporation, headquartered in Kansas City, with three separate railroad companies that connect end to end and operate under
integrated management
- KCS and Tex Mex are U.S. corporations
- TFM is a Mexican corporation
Surface Transportation Board approval of the common control of KCSR and Tex Mex is required
Mexicos Foreign Investment Commission will review the foreign control of TFM
Mexicos Competition Commission will review the transaction for competitive effects
Enhance shareholder value by achieving consolidation of rapidly expanding TFM affiliate in Mexico, with U.S. ownership
Accretive from day one
Improve Tex Mex infrastructure and operations to better link the Kansas City Southern Railway with TFM
Strengthen KCSR/Tex Mex/TFM as the NAFTA Railroad in North America
Increase EPS contribution from faster-growing rail operations in Mexico
Lengthen hauls through an across-the-border view
Three railroad companies connecting end to end to end
- Maintain the unique culture of each company
- Operating under
integrated management
- Only enhances competitionno reduction of competitors in any market
No 2 to 1 points
No overlaps
Common operating platform, MCS: planned implementation on Tex Mex in September 2003, and on TFM in Q1 2004
- MCS now operating smoothly at KCSR
- Common customer access
- Pro-active service management
Tightly managed service across U.S.-Mexico border
Seamless service
- Southern Mexico to the heart of the U.S.
- Integrated operating system
- Integrated customer service
Combined resources lead to enhanced product offerings
- 965 locomotives
- 25,206
freight cars
- 140 transload/reload locations
- 14 intermodal ramps
- 13 ports
- 181 interchange points with other railroads
Board of Directors, initially ten members:
- Mike Haverty, Chairman
- Pepe Serrano, Vice-Chairman
- Seven (in addition to Mike Haverty) current KCS Board members; plus Javier Segovia, President of TMM
Management of NAFTA RAIL
- Chairman, President & CEO: Mike Haverty
Management of Kansas City Southern Railway
- Chairman, President & CEO: Mike Haverty
Management of TFM
- Chairman: Pepe Serrano
- CEO: Mario Mohar
To NAFTA RAIL from GTMM
- 38.8% of effective ownership of TFM
To GTMM from NAFTA RAIL
- 18
million shares of NAFTA RAIL
- $ 200 million cash
- Potential incentive payment of $100 million-$180 million based on a resolution of certain contingencies
51.0% of Mexrail acquired by NAFTA RAIL for $32 million
Income statement data *
(US$mm)
KCS consolidated | Grupo TFM consolidated | combined | |
2002 Revenue | $ 566 | $ 712 | $ 1,278 |
growth vs. 01 | ( 1.9 % ) | 6.6% | 2.7% |
2002 EBITDA | $ 109 | $ 259 | $ 368 |
margin | 19.3% | 36.4% | 28.8% |
2002 EBIT | $ 48 | $ 176 | $ 224 |
margin | 8.5% | 24.7% | 17.5% |
· NOTES:
KCS consolidated 2002 EDITDA and EBIT exclude KCS equity in earnings of Grupo TFM, resulting from existing 37.3% of effective ownership in
TFM.
Combined amounts are presented only to demonstrate the relative size of NAFTA Rail if the transaction is consummated. The combined amounts do not reflect the impacts of the application of purchase accounting and do not purport to reflect pro forma financial results as if the transaction had been consummated at the beginning of 2002.
Balance Sheet data *
(US$mm)
KCS consolidated | Grupo TFM consolidated |
combined | ||||
Cash | $ |
19 | $ |
30 | $ |
49 |
Debt | $ |
583 | $ |
1,023 | $ |
1,606 |
Net debt | $ |
564 | $ |
992 | $ |
1,556 |
* NOTES:
Balance sheet data before acquisition financing. Source: Balance sheet data as of 12/31/02.
Combined amounts are presented only to
demonstrate the relative size of NAFTA Rail if the transaction is consummated. The amounts do not reflect the impacts of the application of purchase accounting and do not purport to reflect pro forma balance sheet data as if the transaction
had been consummated at December 31, 2002.
TFM filed a lawsuit against the Mexican Government in 1997 alleging that the Government failed to make a value added tax refund in the amount of $206 million
October 11, 2002: the Mexican Magistrates Court (the appellate court) unanimously ruled in favor of TFM and ordered the lower Fiscal Court to issue a new ruling consistent with the appellate courts opinion
December 10, 2002: the lower Fiscal Court issued a ruling denying TFM the right to receive the VAT refund
TFM appealed the December 10th ruling to the Mexican Magistrates Court on January 29,2003
No VAT/ No Put
18.0M shares issued @ $ 11.77 (closing 4/17/03) | $ | 211.9 |
Cash | $ | 200.0 |
Purchase total | $ | 411.9 |
Total value for TMMs interest | $ | 411.9 |
TMMs interest in TFM | 38.8% | |
Implied equity value of TFM | $ | 1,061.5 |
TFM debt | $ | 1,023.1 |
TFM cash | $ | 30.2 |
Implied Total Enterprise Value | $ | 2,054.4 |
Implied multiples: | TFM metrics | ||
2002 revenue | $ | 712.1 | 2.9x |
2002 EBITDA | $ | 259.2 | 7.9x |
2002 EBIT | $ | 176.1 | 11.7x |
Valuation Summary: 38.8% of GTFM
Valuation Method | Valuation Range | Relevant Parameter | |||
$200 million plus | |||||
18 million shares | |||||
Purchase Price | $ 412 | @ $11.77 per share | |||
Rail Industry | LTM EBITDA | ||||
Trading | $319 $ 419 | multiple: | |||
Comparables | 7.0x 8.0x | ||||
Rail Industry | LTM EBITDA | ||||
Transaction | $ 444 | $545 | multiple: | ||
Comparables | 8.25x 9.25x | ||||
$200 | $400 | $600 |
No VAT/ No Put
2003E | * | 2004E * | |||
KCS standalone EPS | $ | 0.79 | $ | 1.05 | |
NAFTA Rail EPS | Higher | Higher | |||
Benefit to NAFTA Rail shareholders | Accretive | Accretive |
* First Call Estimates 4/17/03
In connection with the proposed transaction, Kansas City Southern (KCS) will file relevant materials with the Securities and Exchange Commission (SEC), including a proxy statement soliciting shareholder approval of certain actions in connection with the transaction. Shareholders are urged to read the proxy statement, as well as any amendments and supplements to the proxy statement (if and when they become available) and any other relevant documents filed with the SEC, because they will contain important information about the transaction. Shareholders and investors may obtain the proxy statement and any other relevant documents free of charge at the SECs Internet web site at www.sec.gov. Shareholders may also obtain free of charge the proxy statement and any other relevant documents by contacting the office of the Corporate Secretary at KCSs principal executive offices at (816) 983-1538. Written requests should be mailed to P.O. Box 219335, Kansas City, Missouri 64121-9335 (or if by federal express or other form of express delivery to 427 West 12th Street, Kansas City, Missouri 64105). Such proxy statement is not currently available. KCS and its directors and executive officers may be deemed to be participants in the solicitation of proxies from KCS shareholders with respect to approval of certain actions in connection with the transaction. Information regarding these directors and executive officers and their beneficial ownership interests in KCS can be found in KCSs proxy statement on Schedule 14A, filed with the SEC on April 4, 2003, in connection with the 2003 annual meeting of KCS shareholders. Investors may obtain additional information regarding the interests of such participants by reading the proxy statement filed in connection with the transaction when it becomes available.
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