Comment - Anheuser-Busch InBev and Grupo Modelo - Peace, at last?
Has peace broken out between Grupo Modelo and Anheuser-Busch InBev?
“An arbitration panel issued a decision finding that the combination of Anheuser-Busch and InBev did not violate the investment agreement between entities of Anheuser-Busch and Grupo Modelo,” the statement, released today (12 July), started.
“The panel awarded no damages or other 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.
In total, we're looking at all of 67 words here.
What we expect to happen next, however, could be described in even briefer terms.
The row stems from Modelo's displeasure at InBev's purchase of Anheuser-Busch back in 2008. A-B holds a non-controlling 50% stake in the Corona brewer. Modelo had taken issue with its role as a pawn in the battle between A-B and InBev immediately prior to the purchase. During the struggle, the US brewer reportedly considered making a move for the balance of Modelo, in an attempt to thwart InBev. This was followed soon afterwards by Modelo's CEO, Carlos Fernandez, quitting his position on A-B's board.
In filing its legal case, Modelo wanted to have the right of consent over what happened to A-B's stake in its business.
So, now that Modelo's legal push against A-B InBev has failed, what can we expect to happen next?
Simple – nothing.
Modelo may not have got what it wanted from the decision – which included, among other things, “money damages of up to US$2.5bn” - but it has certainly earned the right to be taken seriously by A-B InBev. Rest assured, its voice will be heard at A-B InBev's headquarters.
The beer giant, meanwhile, has not been forced into a corner that it would have had to buy its way out of. Acquiring the balance of Modelo would have been both complex and expensive – two things A-B InBev could well do without as it weathers the downturn and continues getting its post-takeover house in order.
So, now this has been put to bed, we can expect some peace between Mexico City and St Louis.
And yet, one analyst believes the situation ought still to be monitored going forward. “After arbitration started,” writes Alan Alanis at JP Morgan today, “A-B InBev chose to propose Modelo’s board members mainly from A-B employees with legal and financial backgrounds instead of managers with an operating background from InBev/AmBev. Plus A-B InBev has not exercised any of its veto powers at Modelo's board.
“We wouldn’t be surprised if next year former InBev/AmBev employees become Modelo board members and these become more active at the board meetings.”
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