Grupo Modelo, S.A.B.

produces something very near and dear to my heart: many of Mexicos finest beers, including Corona (the top U.S. export), Modelo Especial, Negra Modelo, Victoria, and Pacifico. Grupo Modelos brands represent approximately 56% of the Mexican beer market. InBev, NVs $52 billion acquisition of Anheuser-Busch raises the question of what will become of the 50% non-controlling stake in Grupo Modelo owned by Anheuser-Busch. A July 17, 2008 article in The Wall Street Journal reported that the agreement between Anheuser-Busch and Grupo Modelo gives Anheuser-Busch the right to fill 9 seats on Grupo Modelos 19-member board of directors and certain rights regarding areas such as capital expenditures. (I found a copy of the Investment Agreement governing the relationship between Anheuser-Busch and Grupo and the Second Amendment thereto, but I could not find the First Amendment anywhere.) The July 17, 2008 Wall Street Journal article also speculated that Grupo Modelo and its key competitor, Fomento Economico Mexicano, S.A.B. (FEMSA), might be sold as part of global consolidation in the beer industry, starting with the sale of Grupo Modelo to InBev. FEMSAs brands, including Sol, Tecate, Dos Equis, Bohemia, and Indio, account for approximately 42% of the Mexican beer market. FEMSA is also the largest Coca-Cola bottler outside of the U.S. It should be interesting to watch the InBev/Anheuser-Busch/Grupo Modelo relationship evolve. The possibility that Grupo Modelo may engage in some posturing concerning its intent to purchase Anheuser-Buschs 50% Grupo Modelo ownership interest should not be ruled out. The Brazilian/Belgian-Mexican companies could be a powerful combination.