Association of Transportation Law Professionals’ Association Highlights Jan 8, 2007 JUST WHAT ARE UP’S INTENTIONS? By Frank Wilner (The following opinion article explores the political connections of Union Pacific Railroad and speculates on intentions of Union Pacific to acquire rail routes in Mexico as a prelude to merging with either CSX or Norfolk Southern as well as Canadian Pacific. The article was published Jan. 8 in a transportation law journal.) Is Union Pacific (UP) in the hunt for Mexico’s largest and most prized railroad – Kansas City Southern de Mexico (KCSM) — now leased by Kansas City Southern Railway (KCS)? What UP possesses to make this a reality – and which BNSF Railway, also in the hunt, may not possess – are the political connections in Mexico. For sure, BNSF has the cash to make an unsolicited bid for stock control of KCS; but BNSF may not have enough political muscle to obtain Mexican government approval for control of KCSM. It is said that with the right political connections in Mexico, one might achieve most anything. And while UP may be short of cash, it is rich with political connections. Indeed, all it might take for UP to snatch control of KCSM is an unsolicited bid for KCS by a cash-rich private equity firm friendly to UP – such as the Carlyle Group; followed by a break-up of KCS, with KCSM being transferred to UP with the help of politicos in Mexico. So important are those political connections south of the border that even were BNSF to make an unsolicited bid for KCS, the KCSM routes could still be transferred to UP. You see, it’s highly unlikely the U.S. Justice Department, Federal Trade Commission or even Surface Transportation Board could assert any jurisdiction over UP’s acquisition of a purely Mexican based railroad – assuming those agencies, given UP’s superior political connections north of the border, would even blink an eye. KCSM — whose 50-year concession KCS acquired from Mexican conglomerate Grupo TMM - is Mexico’s most coveted railroa
There is an ongoing discussion of this in the thread I wonder what Some BNSF Execs may be up to today…