UPDATE 5-Mexico's Modelo starts arbitration against Anheuser

Thu Oct 16, 2008 5:35pm EDT

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(Adds Bevmark comments, closing share price)

By Cyntia Barrera Diaz

MEXICO CITY Oct 16 (Reuters) - Mexico's Grupo Modelo, maker of Corona beer, said on Thursday it initiated arbitration against its U.S. partner Anheuser-Busch, claiming it was not consulted about Belgian brewer InBev's proposed takeover of Anheuser.

Anheuser-Busch Cos Inc (BUD.N) agreed in July to a $52 billion takeover by InBev NV INTB.BR, maker of Stella Artois and Beck's, to create the world's largest brewer.

Modelo (GMODELOC.MX), half owned by Anheuser-Busch, said it was not consulted by its U.S. partner about InBev's offer.

Modelo has not said what it wants. Analysts have said it wants more money or to block the merger.

"There has always been a stick-in-your-throat Modelo issue. We have assumed that it will be swallowed, but only with difficulty," said Tom Pirko, president of Bevmark LLC, a beverage industry consulting firm.

On Thursday, InBev and Anheuser said via separate releases that they believed Modelo's claims lacked merit and the arbitration would have no impact on the completion of the deal.

"We believe we are right in our claim and trust the arbitrators will agree with us," a Grupo Modelo spokeswoman told Reuters.

She had earlier explained that Modelo and Anheuser will have 30 days for each to name an arbitrator; the two arbitrators will then pick a third for the panel that will rule on the case.

She could not say how long the New York-based arbitration would last.

Earlier this week, InBev postponed a 9.8 billion-euro ($13.39 billion) rights issue to complete the takeover of Anheuser, citing market volatility, but reaffirmed that it will complete the acquisition of its U.S rival by the end of 2008.

"The meltdown of the banks has played to its (Modelo's) advantage. There is now considerably more risk for InBev and it can't take Modelo lightly," Pirko added. "The longer Modelo resists, the more dangerous it becomes in what is already a hailstorm environment for InBev."

InBev's takeover of Anheuser is set to become 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 one-quarter of the world's beer.

Grupo Modelo shares fell 3.46 percent to close at 39.35 pesos. (Additional reporting by Martinne Geller in New York; Editing by Maureen Bavdek, Phil Berlowitz)

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