Feb. 23 (Bloomberg) -- Anheuser-Busch InBev NV, the brewer formed in a $52 billion merger last year, will sell its Labatt USA unit to KPS Capital Partners LP, satisfying regulators concerned it would dominate upstate New York’s beer market.

AB InBev, based in Leuven, Belgium, didn’t disclose a sale price. Its Canadian arm, Labatt Brewing Co., is also granting KPS use of the brand in the U.S., and will brew beers including Blue and 50 on the U.S. company’s behalf for up to three years. The deal doesn’t affect Labatt’s Canadian operations.

KPS, which manages $1.8 billion, separately said today that it will also buy Rochester, New York-based High Falls Co., the brewer of Genesee beer, and acquire licenses for Pernod Ricard SA’s Seagram’s coolers. Labatt USA and High Falls will be combined into a business called North American Breweries, and KPS said it would look for more beer takeovers.

InBev NV’s purchase of Anheuser-Busch Cos. created the world’s biggest brewer and united brands from Stella Artois to Budweiser. The Justice Department approved the deal in November on condition that the merged company sell the Buffalo-based Labatt USA unit. Labatt Brewing, founded in London, Ontario, in 1847, expanded to nearby western New York state before it was sold to InBev predecessor company Interbrew in 1995.

Shares of AB InBev, which has half the U.S. beer market, rose 43 cents, or 2.1 percent, to 21.05 euros at 10:21 a.m. in Brussels.

More KPS Purchases

Labatt brands “account for a significant portion of the Buffalo, Rochester and Syracuse beer markets,” the Justice Department said in court papers last year. Labatt’s overall share of the U.S. beer market is about 2 percent.

KPS didn’t disclose terms for any of the purchases.

“We intend to continue to grow North American Breweries aggressively, both organically and through acquisition,” KPS partner Raquel Vargas Palmer said in the statement. The deal for High Falls, whose origins trace to 1857, had the “support” of local governments including the city of Rochester, the statement said, without giving more details.

The former Genesee Corp., once the No. 5 U.S. brewer, was wound up earlier this decade. The beer assets, now known as High Falls, were sold to a management group for about $26 million.

KPS focuses on acquiring troubled companies and fixing their operations, according to a Feb. 9 report in the Wall Street Journal. The New York-based private-equity firm is reportedly in talks to buy collapsed Irish crystal maker Waterford Wedgwood Plc.

To contact the reporters on this story: Holger Elfes in Dusseldorf at helfes@bloomberg.net; Keith Campbell in Londont .

Last Updated: February 23, 2009 04:49 EST