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UPDATE 3-Modelo CEO resigns from Anheuser-Busch board
June 20, 2008 / 1:53 PM / in 9 years

UPDATE 3-Modelo CEO resigns from Anheuser-Busch board

(Adds more comments, details on Crown acquisition, byline)

By Martinne Geller

NEW YORK, June 20 (Reuters) - Anheuser-Busch Cos Inc (BUD.N) on Friday said Grupo Modelo GMODELOC.MX Chief Executive Carlos Fernandez resigned from its board of directors, signaling the loss of a potential key ally in the U.S. brewer’s fight to fend off an unsolicited takeover bid from InBev NV INTB.BR.

Fernandez, who had been a board member since 1996, left “to avoid any appearance of a conflict (of interest),” according to a Modelo spokeswoman.

Such a conflict could result from several scenarios, according to Robbert van Batenburg, head of research for Louis Capital Markets in New York. Most likely, he said, would be that Mexico’s No. 1 brewer Modelo, which is half-owned by Anheuser, was negotiating to sell Anheuser the half it doesn’t own or talking to InBev about a side deal.

Fernandez’s departure may also signal “a further erosion” of ties between Anheuser’s founding Busch family and Modelo’s founding Fernandez family, van Batenburg added, noting that the relationship between the two dynasties has deteriorated over the years since Anheuser bought its stake in Modelo in 1993.

Modelo, brewer of beers including Corona and Negra Modelo, is emerging as a critical power broker in the battle for control of Anheuser, the largest U.S. brewer and maker of Budweiser and Michelob.

As St. Louis-based Anheuser-Busch weighs a $46.3 billion takeover proposal from Belgian-Brazilian brewer InBev, reports have surfaced that Anheuser was in talks with Modelo about buying the Mexican brewer outright to make itself too big for InBev to swallow. Reports have also surfaced that InBev has reached out to Modelo, assuring it that if InBev took over Anheuser, it would let Modelo decide its own fate.

Such an incentive could have led Fernandez to vote in favor of an InBev takeover, speculated Ann Gilpin, an analyst with Morningstar. So his departure could be a slight positive for Anheuser and the Busch family should they want to stay independent, she said, since it removes his vote.

Gilpin said she believes Fernandez’s interests lie first with Modelo and secondly with Anheuser-Busch.

“Given that Grupo Modelo is going to potentially play a key role in whether Anheuser-Busch stays independent or not, I think he (Fernandez) would rather be representing the interests of Grupo Modelo,” Gilpin said.

Anheuser has been punished over the years by Wall Street, in part for its keen focus on the mature U.S. market where beer sales are slowing. It said on Friday that it will take over a joint venture it formed last year to bring its Budweiser beer to southern and western India. Terms were not disclosed.

Anheuser-Busch shares were down 2 cents at $61.03 on the New York Stock Exchange in afternoon trading. (Reporting by Martinne Geller, editing by Gerald E. McCormick and Steve Orlofsky)

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