March 29, 2017 / 6:25 PM / 4 months ago

Grupo Mexico says Florida railroad buy offers dollar cash flow

2 Min Read

MEXICO CITY (Reuters) - Mexican mining, rail and infrastructure firm Grupo Mexico said on Wednesday its planned takeover of Florida East Coast Railway would allow it to expand its exposure to U.S. rail freight, increase dollar earnings and diversify revenue sources.

In an analyst call, Grupo Mexico executives said they expected the $2.1 billion deal, which is subject to government approval, to close within 60 to 90 days.

They said the company, which owns Ferrocarril Mexicano (Ferromex), Mexico's largest railroad operator, is always open to acquisition opportunities but had no imminent plans for a long-delayed initial public offering of its rail unit.

The planned acquisition comes at a sensitive time for relations between the United States and Mexico, following a pledge by U.S. President Donald Trump to renegotiate the North American Free Trade Agreement and tighten immigration controls.

Grupo Mexico said Florida East Coast Railway has the "highest revenue per track mile of any major railroad in North America" and offers a direct connection between the nation's class I railroads and Florida's largest freight markets.

It said the expansion of the Panama Canal should consolidate Florida as a key gateway to North America.

Based in Jacksonville, Florida East Coast Railway operates a 351-mile (565-km) freight rail system located along the east coast of Florida, employs more than 1,200 people and has a fleet of 73 locomotives and some 4,290 cars.

Grupo Mexico, one of the world's largest copper producers, together with Kansas City Southern de Mexico and Ferrovalle, control more than 72 percent of the Mexican rail freight market. Grupo Mexico and Kansas City Southern de Mexico together have a 75 percent stake in Ferrovalle.

Earlier this month, Mexico's antitrust watchdog criticized Grupo Mexico and Kansas City Southern de Mexico for using their rail freight market share to fix prices, restrict supply and impede access to their networks.

Reporting by Gabriel Stargardter and Veronica Gomez; Additional reporting by Anthony Esposito; Editing by Bill Trott

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