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Justice, AB InBev seek to extend delay in big beer deal

View of Anheuser-Busch InBev logo outside the brewery headquarters in Leuven August 12, 2010. REUTERS/Jan Van De Vel
View of Anheuser-Busch InBev logo outside the brewery headquarters in Leuven August 12, 2010. REUTERS/Jan Van De Vel

By Diane Bartz

WASHINGTON (Reuters) - The U.S. Justice Department and beer giant Anheuser-Busch InBev , embroiled in a battle over whether AB InBev can expand its stake in Mexico's Grupo Modelo , asked a court on Friday to extend a delay in the court fight as they hold settlement talks.

"The parties agree that an extension of the current stay will likely enable the parties to complete their discussions," AB InBev, Modelo and Constellation Brands said in a statement.

"There can be no assurance that the ongoing discussions will be successful," they added.

The two sides requested that the delay be extended until April 9 from March 19.

The Justice Department had filed a lawsuit on January 31 aimed at stopping AB InBev, the world's largest brewer with some 200 brands, from buying the 50 percent of Modelo it does not already own for $20.1 billion.

When the deal was originally announced, AB InBev said it would sell its 50 percent share of Modelo's U.S. distributor, Crown Imports, to Constellation Brands, the world's largest wine company.

After the Justice Department sued to stop the deal, AB InBev announced that it was willing to sell Modelo's Piedras Negras brewery in Mexico near the U.S. border to Constellation for $2.9 billion and that it would grant Constellation perpetual rights for Corona and other Modelo brands in the United States.

A Justice Department spokeswoman was not immediately available for comment.

Despite a huge array of beers on store shelves, the U.S. beer market is dominated by two big players.

AB InBev is the top seller, with 200 brands ranging from big names like Budweiser and Stella Artois to craft-style beers like Shock Top and Goose Island. The No. 2 player is MillerCoors, a joint venture between SABMiller Plc and Molson Coors Brewing Co .

AB InBev, formed in 2008 when InBev bought Anheuser Busch, was the top U.S. brewer with 47 percent of the U.S. beer market going into the Modelo deal.

Analysts have said the main benefits of the proposed deal for AB InBev lie in Mexico, the world's fourth largest market in terms of profit generated, and in driving Corona sales abroad.

The deal has a huge upside for New York-based Constellation Brands Inc, the world's largest branded wine company, which makes Robert Mondavi and Ravenswood wines. It also sells spirits including Black Velvet Canadian Whisky and SVEDKA vodka.

The revised deal would make Constellation the third largest U.S. beer producer.

AB InBev and Constellation have agreed to a three-year transition period, during which Constellation plans to invest $400 million to expand Piedras Negras' capacity to enable it to supply 100 percent of U.S. needs, up from 60 percent today.

AB InBev would supply Constellation with beer, cans and other assistance over this period. Constellation would have the option to extend the beer supply period by up to two more years.

The case was filed in the U.S. District Court for the District of Columbia. It is United States of America v. Anheuser-Busch InBev and Grupo Modelo. The case is No. 13-cv-00127.

(Reporting by Diane Bartz; Editing by Ros Krasny, Gary Hill, Bernard Orr and Leslie Adler)

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