UPDATE 1-Assa, Spectrum Brands reach settlement with US on deal

(Adds details from Assa and Fortune's press releases, background on Justice Department suit)

May 5 (Reuters) - Sweden's Assa Abloy AB, the world's No. 1 lock maker, and U.S.-based Spectrum Brands Holdings said on Friday they have reached a settlement with the U.S. Justice Department regarding Assa's $4.3 billion proposed deal to buy Spectrum's hardware and home improvement (HHI) division.

The Justice Department last year sued to block the proposed deal by Assa Abloy to buy the Spectrum Brands HHI division, which makes residential door hardware, saying the deal could lead to higher prices.

Assa Abloy makes Yale, August and EMTEK brands, while Spectrum's division makes the Baldwin and Kwikset brands.

Under the settlement disclosed on Friday, Assa Abloy will proceed with the divestment of its Emtek and the Smart Residential business in the United States and Canada to Fortune Brands, the company said in a statement.

In a separate statement, Fortune said it will go ahead with the purchase of businesses from Assa Abloy for $800 million.

Assa Abloy agreed in December to sell the businesses to Fortune in a bid to resolve the U.S. antitrust issues.

Both Assa and Spectrum said they expect the deal to close by the end of June.

(Reporting by Juby Babu in Bengaluru; Editing by Will Dunham and Sandra Maler)