Mexico's Modelo should warm to new partner InBev

MEXICO CITY (Reuters) - Mexican brewer Modelo should eventually embrace InBev NV's $52 billion takeover of its U.S. partner Anheuser-Busch Cos Inc and down the road might strengthen the ties with a new U.S. distribution deal.

Modelo, maker of Corona beer and 50 percent owned by Anheuser, said early Monday that it was in talks with InBev on how the companies could work together -- should Modelo decide not to exercise its contractual rights to keep Belgium's InBev from becoming a minority owner of Modelo by buying Anheuser.

Analysts said Modelo is not expected to try to block the takeover that would create the world's top brewer. InBev Chief Executive Officer Carlos Brito said he sees no impediment to the deal from Modelo and sees a "great partnership" between the Belgian and Mexican brewers.

"If I had to make a prediction, I would guess that after a relatively short period of time they (Modelo) are going to accept the new status quo, which in some ways is the old status quo," said Steve Dixon, manager of Global Beverage Fund at Arnhold & S. Bleichroeder in New York.

But analysts say that Modelo will still fiercely defend its independence and will not sell control to InBev, which also is in no financial position to persuade the family-run Modelo board to sell its estimated $8 billion stake.

"I do not think that they (InBev) are in a position to make a very attractive offer for Modelo. I see it as very unlikely," said Vector brokerage analyst Laura Herrera. "Moreover, Modelo does not want to sell."

Modelo's Chairman and CEO Carlos Fernandez told Reuters last month -- just before InBev launched its bid for Anheuser -- that he expected the maker of Negra Modelo and Victoria beers to remain in Mexican hands.

Antonino Fernandez, Carlos Fernandez's uncle and family patriarch, controls Modelo's family voting trust. Analysts say the trust is determined that Modelo remain independent despite the consolidation in the global beer industry and the potential rich pickings from selling out.

But if InBev and Modelo agreed to work together -- Modelo says its contract with Anheuser includes a consent right over a new partner -- the two could form a joint U.S. distribution deal for the Budweiser and Corona brands.

"Obviously a distribution accord will create synergies, and if they agree to work together it would be very favorable," said Vector's Herrera.

"InBev is likely coveting the opportunity to fully and seamlessly integrate the Modelo and Anheuser-Busch portfolios in the United States," Credit Suisse said in a note.

"Corona and Corona Light are important step-up solutions to Bud and Bud Light in the United States."

In a blatant snub of Anheuser and a sign of the friction between the two partners, Modelo only last year linked up with Constellation Brands Inc, a leading wine and liquor player, to form Crown Imports LLC to act as the sole importer of Modelo's beers in the United States.

Modelo's CEO Fernandez stepped down from the Anheuser board when the takeover bid broke, which analysts say was a sign he wanted to stay independent and distance himself from Anheuser.

Now analysts are betting that Fernandez will soon welcome the InBev deal and embrace the new partner -- but keep his iron-fisted control of Modelo's board and operations.

Fernandez and members of other closely tied Mexican families -- including Maria Asuncion Aramburuzabala, Mexico's richest woman, who is married to Tony Garza, the U.S. ambassador to Mexico -- hold 56.1 percent of Modelo's voting shares.

But Modelo's chairman and CEO might be in for a much rougher ride at future board meetings if it embraced InBev. Anheuser has nine seats on Modelo's 19-seat board.

"We cannot imagine that InBev, with considerable emerging markets experience in many of the disciplines where Modelo is deficient, will sit passively by at the board of directors," Credit Suisse said.

"Modelo Chairman Carlos Fernandez may have even greater acrimony to deal with at his board of directors as we go forward," the brokerage said.

(Additional reporting by Martinne Geller in New York, editing by Gerald E. McCormick)