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Budweiser Brewer Talking To Corona Maker To Fend off InBev

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People familiar with the matter said Anheuser, owner of the Budweiser beer brand, recently approached Carlos Fernandez, chief executive of Modelo and an Anheuser director, after news surfaced that InBev was weighing an unsolicited bid for Anheuser.

InBev, which brews Stella Artois, made its takeover plans official on Wednesday, offering to buy the iconic Budweiser maker for $US46.4 billion ($49.7 billion) in cash, or $US65 a share.

Anheuser-Busch already owns a non-controlling stake of about 50 per cent in Modelo, the largest Mexican brewer by sales and owner of the Corona beer line, and could potentially thwart InBev’s approach by buying the rest of Modelo, making the combined company too big for InBev to swallow.

Anheuser-Busch and Modelo declined to comment. The Budweiser owner has said its board would carefully evaluate InBev’s offer and respond in “due course”.

Modelo’s Mr Fernandez would have a significant role in an Anheuser-Modelo deal, according to a source, who also said Anheuser also believes the $US65-a-share offer dramatically undervalues the St Louis beer maker.

It isn’t clear what kind of transaction Anheuser-Busch and Modelo have discussed, and there are enormous hurdles for any tie-up.

Modelo would have to be willing to lose its cherished independence to allow Anheuser-Busch to take over. Both companies would also have to put aside years of hostility and resentments that have built up during their partnership, which dates to the early 1990s.

And even if Modelo decided to sell, an Anheuser-Modelo deal may not persuade Anheuser-Busch shareholders that the combination is worth giving up the money that InBev is putting on the table.

Credit Suisse industry analyst Carlos Laboy posed the question: “If you are an Anheuser-Busch shareholder, are you willing to give up $US65 or higher in your pocket for the risk of an expensive acquisition that requires a turnaround in a market where you’ve never really operated?”

Mr Laboy says the most likely outcome of the industry consolidation under way is that InBev will end up with both Anheuser-Busch, the dominant US beer maker, and Modelo.

Anheuser’s chief executive August A Busch IV has indicated he is open to closer ties with Modelo, which has about 57 per cent of the Mexican beer market but is viewed by analysts as a poorly run company that needs a turnaround.

In an interview with The Wall Street Journal last December, Mr Busch said: “There’s a lot of opportunities out there in working with Grupo Modelo and Carlos Fernandez. He’s a superstar.

“They’ve got cash in the bank, but they control their company. So their ability to come along with us, if we can convince them that a certain opportunity would make sense for both of us, would, I think, be a very interesting proposition.”

Last month, Mr Busch reiterated to the WSJ the possibility of teaming up with Grupo Modelo in an unspecified capacity.

Like the US company, Modelo is a family-run business that is fiercely independent and proud of its traditions.

Unlike the Busch family, which only has a small percentage of Anheuser’s voting shares and must ultimately answer to majority shareholders, Modelo is controlled by a voting trust, which in turn is controlled by 90-year-old patriarch Antonino Fernandez.

If Antonino Fernandez doesn’t want to sell, Modelo isn’t selling, say analysts.

“They’ve been doing business their way for decades and see no reason to change,” says a family friend of the Fernandez family.

InBev chief executive Carlos Brito, in his letter to Anheuser that announced the bid on Wednesday, said: “We would hope to work with Grupo Modelo to find new opportunities to further accelerate the development of their brands outside North America.”

He said InBev has “long-standing admiration for” Anheuser’s strategic partner.

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Sunday, August 20, 11:46 am

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