Analysts sceptical that Grupo Modelo will get Anheuser-Busch InBev backing for Fosters Group beer bid

Analysts sceptical that Grupo Modelo will get Anheuser-Busch InBev backing for Foster's Group beer bid

Grupo Modelo is set to meet with Anheuser-Busch InBev to seek permission to launch a takeover bid for Foster's Group, according to a report.

Modelo and A-B InBev will discuss the issue at a meeting in Mexico City today (13 June), according to a Bloomberg report that cited people familiar with the situation.

A-B InBev has a 50% non-controlling stake in Modelo and, according to the terms of the tie-up, the Mexican brewer would only be able to pursue Foster's with the Budweiser brewer's blessing.

News of the meeting comes less than a fortnight after Modelo and Molson Coors were outed as potential joint bidders for Foster's, which has a market value of close to AUD9bn (US$9.5bn).

Speculation about potential bids for Foster's is rife. As of last month, the group is predominantly an Australian beer business following the spin-off of its international wine operations. Foster's also commands relatively strong profit margins and is one of a dwindling number of publicly-listed brewers considered available for takeover.

Several analysts have expressed doubt that A-B InBev would allow Modelo to move for Foster's. "Why run the risk of investing a large amount in a market that is so small, distant and declining?," said JPMorgan's Alan Alanis in a note last week.

He said that it is possible that Modelo could secure a deal without Molson Coors that would also bolster the Mexican group's earnings, but that "strategically, it's a stretch".

Morningstar analyst Phil Gorham said: "We think it highly unlikely that A-B InBev will give its consent, because an acquisition of Foster's by Modelo could weaken the voting rights of the A-B InBev representatives on [Modelo's] board of directors.

He added: "If A-B InBev's management views the deal as attractive, the firm has the financial clout to acquire Foster's Group outright."