Modelo playing cards carefully in Anheuser bid

Bottles of Corona beer speed past a worker in the bottling line of Mexico City's Modelo brewery May 19, 2004.

MEXICO CITY (Reuters) - Mexico's Modelo, the maker of Corona beer, is playing its cards carefully in talks with InBev NV over a partnership as part of the Belgian brewer's planned $52 billion takeover of Anheuser-Busch Cos Inc.

Modelo (GMODELOC.MX) says it has contractual rights to be able to choose whether or not to go into an alliance with InBev INTB.BR.

The Mexican company currently has a favorable deal with Anheuser-Busch, which owns 50 percent of Modelo but does not have administrative or board control.

"On this proposed transaction between AB and InBev, Grupo Modelo is reserving its contractual rights," Modelo's chief executive, Carlos Fernandez, said on Monday.

"Our agreement with Anheuser-Busch, signed in 1993, was carefully constructed to ensure we have a definite say in who our partner is," Fernandez told an analysts' conference call.

Modelo is in the hands of a voting trust run by a group of closely connected Mexican families.

Fernandez said he was optimistic Modelo could reach a favorable solution for its shareholders in the wrangle over InBev's (BUD.N) bid for Anheuser, the maker of Budweiser beer and also known as AB.

"We know InBev's management team well. We have been holding discussions over the past weeks about how we could work together should they become a minority owner in Grupo Modelo," Fernandez said.

Pushed for more details on why he was optimistic of a favorable outcome, the CEO declined further comment.

WORLD'S LARGEST

InBev's takeover of Anheuser, which is widely expected to gain regulatory approval, will create the world's largest beer maker. The deal would be the largest in the industry and the third-largest foreign takeover of a U.S. company.

The combined company, which will be called Anheuser-Busch InBev, will have about $36.4 billion in annual net sales and brew about a quarter of the world's beer.

The beer industry is undergoing a wave of consolidation, with Scottish & Newcastle SCTN.L agreeing to be broken up by Carlsberg A/S (CARLb.CO) and Heineken NV (HEIN.AS), and SABMiller Plc (SAB.L) and Molson Coors Brewing Co (TAP.N) agreeing to merge their U.S. operations.

InBev is known for ruthless cost-cutting, and its advances on a U.S. icon sparked an outcry from Anheuser's home base in St. Louis to Washington, with even Democratic presidential candidate Barack Obama weighing in against a deal.

Analysts have said that Modelo is likely to embrace InBev's bid for Anheuser and hopes the Belgian brewer proves to be a more dynamic and innovative partner than the biggest U.S. brewer.

Modelo, Mexico's No. 1 brewer posted an 18.1 percent decline in second-quarter net profit on Friday as raw material and energy prices rose.

InBev, which was formed by the 2004 merger of Belgium's Interbrew with Brazil's AmBev, is run by a mostly Brazilian management team. Its portfolio includes more than 200 brands, including Stella Artois and Beck's.

While Anheuser earns about 85 percent of its profits from the United States, where it controls nearly half the market, InBev has strong positions in Western Europe and Latin America and is growing in Eastern Europe and Asia.

(Additional reporting by Alistair Bell; editing by Gunna Dickson)