UPDATE 1-AB InBev says Modelo bid for damages dismissed

Mon Jul 12, 2010 6:44am EDT

* Arbitrator rules against Modelo's $2.5 bln claim-InBev

* Could pave way for AB InBev to buy rest of Modelo-analysts

* Remaining 50 pct could cost $11-13 bln

(Adds shares, analysts' comments)

By Philip Blenkinsop

BRUSSELS, July 12 (Reuters) - Anheuser-Busch InBev (ABI.BR), the world's largest brewer, said on Monday a New York arbitration panel has ruled that its ownership of a 50 percent stake in Grupo Modelo (GMODELOC.MX) is legitimate, dismissing the Mexican beermaker's $2.5 billion claim.

Ending the dispute could open the way to AB InBev taking an increased stake in Modelo, Mexico's largest brewer and producer of the Corona brand, analysts say.

AB InBev shares were 0.5 percent higher at 41.43 euros at 1000 GMT, when the Stoxx 600 European food and beverage index .SX3P was up 0.1 percent.

Modelo filed for arbitration in October 2008 during InBev's $52 billion acquisition of Anheuser-Busch, which owned 50 percent of Modelo, claiming it was not consulted about the takeover. Last year AB InBev said Modelo was also demanding $2.5 billion in damages.

Analysts said the news was positive in removing the prospect of it having to pay damages, but also wondered how the two companies would cooperate in future. Few expected an immediate takeover deal.

Andrew Holland of Evolution Securities said in March that AB InBev was likely to announce this year that it would be acquiring the rest of Modelo. On Monday, he said he believed it at least made sense now for both parties to meet for talks.

"I have no doubt that AB InBev would like to do the deal. The intention of the (Modelo) controlling shareholders is not clear," he said, adding the price for the remaining 50 percent was likely to be between $11 billion and $13 billion.

AB InBev's 50.2 percent equity stake gives it 44 percent of the voting rights. The remaining 56 percent of such rights are in the hands of Modelo's controlling families.

As a growth market, Mexico would accelerate increases in volumes and revenue for AB InBev, which would inevitably also seek cost savings at Modelo.

Modelo's key shareholders may now be inclined to do a deal assuming competition hots up following Heineken's (HEIN.AS) purchase of the beer business of main rival FEMSA (FMSAUBD.MX).

AB InBev, maker of Budweiser, Stella Artois and Beck's, said in a statement that the panel had awarded no damages or remedies.

"Anheuser-Busch InBev is grateful to the panel for clarifying that there has been no breach of the investment agreement and looks forward to continuing its successful business relationship with Grupo Modelo," AB InBev said. (Editing by Greg Mahlich)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.