U.S., beer giant InBev settle dispute over Modelo buy

By Diane Bartz

WASHINGTON (Reuters) - The U.S. Justice Department and Anheuser-Busch InBev <ABI.BR> have agreed to conditions that will allow the beer giant to expand its stake in Mexico's Grupo Modelo <GMODELOC.MX>, according to court documents and company statements on Friday.

The 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 (13.2 billion pounds).

The agreement looks like a victory for AB InBev, which knew early on that the Justice Department would balk at allowing it to expand its already significant U.S. presence. Instead, AB InBev's goal in doing the deal was to expand the sales of Corona and other Modelo brand beers outside the U.S.

The deal requires AB InBev to sell the Piedras Negras brewery in Mexico that makes Corona and other Modelo brand beers for the U.S. market. It also requires the purchaser, Constellation Brands <STZ.N>, to expand the brewery so that it can make at least 20 million hectoliters of beer by December 31, 2016.

The other big winner is Constellation, which has been mostly a U.S. wine giant until now. The arrangement would make Constellation the third largest U.S. beer producer after AB InBev and MillerCoors.

AB InBev is the top U.S. beer 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 <SAB.L> and Molson Coors Brewing Co <TAP.N>.

The deal announced on Friday is similar to what AB InBev had offered in mid-February but adds Constellation, which is buying the Piedras Negras plant, as a defendant to the settlement with the department.

This means that pledges that Constellation makes to the court about expanding the plant to make it big enough to serve the U.S. market will be legally binding.

The agreement means that the companies can close as soon as a court approves their settlement. InBev said in a statement that they expected it to close in June 2013.

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 and Phil Berlowitz)