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AB InBev Near Final Agreement With U.S. Over Modelo Deal

Anheuser-Busch InBev NV (ABI) and the U.S. Justice Department are close to a settlement of a lawsuit seeking to block the brewer’s purchase of Grupo Modelo SAB, three people familiar with the matter said.

An agreement will probably be announced next week, said the people, who asked not to be named because the discussions are confidential. There’s a chance both sides will seek a short extension of an April 9 deadline to report progress on a settlement to the federal judge in charge of the case so they can put the final touches on the deal, two of the people said.

AB InBev is negotiating with the Justice Department for approval of a revised merger plan that would have Modelo sell control of all its brands in the U.S., as well as a brewery it built in Piedras Negras, Mexico, to Constellation Brands Inc. (STZ), a winemaker and beverage distribution company.

The department is reviewing Constellation’s plan to boost brewing capacity at the Piedras Negras plant by about 70 percent to ensure that Modelo-brand products would remain viable competitors in the U.S. beer market, two people familiar with the matter said March 8.

AB InBev rose 0.2 percent to 76.65 euros at 9:04 a.m. in Brussels trading. Constellation fell 0.2 percent to $48.25 in New York yesterday, while Modelo was unchanged at 112 pesos in Mexico City.

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Laura Vallis, a spokeswoman for Leuven, Belgium-based AB InBev in New York, and Angie Blackwell, a Constellation representative, declined to comment on the prospects for settlement. Jennifer Shelley, a Modelo spokeswoman, and Gina Talamona of the Justice Department, also declined to comment.

The Justice Department will probably demand in the consent decree that Constellation make its commitments binding to invest in the expansion of the Piedras Negras plant, said Sandeep Vaheesan, special counsel with the American Antitrust Institute and author of a white paper recommending that the transaction be blocked. The department will also probably insist Modelo transfer to Constellation employees with marketing, distribution and production experience in the beer market, Vaheesan said.

“The Justice Department probably wants to make sure that Constellation, which has been principally focused on wine and spirits, can fill the shoes of Modelo, which is a brewer,” Vaheesan said.

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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