By Diane Bartz
WASHINGTON, April 5 (Reuters) - Anheuser-Busch InBev and the U.S. Justice Department have reached an agreement for a framework to settle their long-running beer brawl, and asked a court to extend a stay in the court fight until April 23, the two sides said in a court filing on Friday.
The Justice Department filed a lawsuit on Jan. 31 aimed at stopping AB InBev, the world's largest brewer with some 200 brands, from buying the 50 percent of Grupo Modelo it does not already own for $20.1 billion, saying the deal could mean higher U.S. beer prices.
That battle may soon be over. "At this time, the parties have reached an agreement in principle on a resolution of this litigation," AB InBev and the Justice Department said in a joint filing to the court.
When the deal was originally announced, AB InBev knew that it faced potential trouble in winning U.S. antitrust approval. So it said upfront that it would sell its 50 percent share of Modelo's U.S. distributor, Crown Imports, to Constellation Brands, the world's largest branded wine company.
But the Justice Department's Antitrust Division argued that the company had such a large U.S. market share that it would have the ability to raise prices, and it sued to stop the deal.
AB InBev sweetened its offer to the Justice Department in February, saying 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.
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 outside the United States.
The agreement in principle is "substantially in line" with the February proposal, Anheuser-Busch InBev said in a statement.
"The parties request this additional stay so that they may finalize the details of a proposed consent judgment and related papers," the two sides said in the filing. "The parties expect this to be their final request to extend the stay."
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.
"Any settlement would have to fully protect U.S. consumers by preserving the competition that Grupo Modelo currently provides, while giving a divestiture buyer the freedom and capability to compete vigorously going forward," Justice Department spokeswoman Gina Talamona said in an statement.
If the two sides do finalize an agreement, it will need to be approved by the court. The proposed transaction also must be approved by Mexican regulators.
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.
The deal has a huge upside for New York-based Constellation Brands, 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.
As part of its effort to sweeten the deal, AB InBev and Constellation agreed in February to a three-year transition period, during which Constellation would invest $400 million to expand Piedras Negras's 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.