JayBee wrote: ↑Mon Apr 26, 2021 4:59 pm
This sets the value of Mexico at least as $28 billion, higher if BNSF's all cash offer isn't judged sufficiently better than CN's. BNSF will then have 24-years to extract that amount of money, plus a profit of at least 11% from Mexico...….The signaled change is that the Northwest franchise (Ferromex) will also get direct access to the Laredo border crossing increasing competition in Mexico. Personally I expect that UP and BNSF will each get control of one of the franchises at that time as they have the most resources. You always point out that Mr. Buffett plays the long game. Likely his chosen successor will too.
I think what has been largely overlooked , notably by this author, is the captioned point Mr. JayBee addresses.
The Mexican government owns those rails - both those operated by KCS-M and Ferromex, in which UP has made substantial investment. What they have done is grant a "franchise" to these respective concerns, in consideration of a "franchise fee" to operate those lines for their own accounts, that is; soliciting and billing, but also maintaining, paying "drivers" and "buying gas".
Apparently, the Government also "gets a cut" of the revenues, much as fast food franchisors (MickeyD et al) collect.
The duration of the franchise appears to be 24 years; and whenever it expires, it will be renegotiated. Part of that renegotiations could be, but don't count on it, a provision for establishing a MEXTRAK, or maybe some other "make work activities". On that latter point, I have seen a presentation by noted rail photographer (TRAINS, PTJ, Railfan) Bob Schmidt, of rail travel in Mexico (when it was still safe during '70's). He included a photo of the telegraphy center at Buena Vista. At least 100 telegraphers tapping out messages that could be more efficiently handled by (State Of The Art Tech then) Telex - but it made work for the "connected". Obviously KCS "gave that the vâmonos".
Now a point yet to be addressed here is to what extent is the KCS franchise transferrable. If that need be renegotiated, that could well be the "opening" Warren will be looking for.