* China approval conditional on joint venture stake sale
* CEO says SABMiller improved offer is compelling and final
* Q2 core profit $4.01 bln vs consensus $4.13 bln
* Brazil beer volume down 4.5 pct after 10 pct drop in Q1 (Updates after China commerce approval)
By Philip Blenkinsop and Ben Blanchard
BRUSSELS/BEIJING, July 29 (Reuters) - Brewer Anheuser-BuschInBev cleared a major hurdle towards its takeover ofSABMiller with regulatory approval from China on Friday,leaving the acquisition's future in the hands of the Britishcompany's board.
China's ministry of commerce said it had approved theacquisition on condition that AB InBev fulfilled its commitmentto sell SABMiller's stake in Chinese beer joint venture CR Snow.
The maker of Budweiser, Stella Artois and Corona said theconditional clearance meant it had satisfied all pre-conditionsfollowing earlier green lights from EU, U.S. and South Africanauthorities.
It is now waiting for the SABMiller board's recommendationon a revised $100-billion-plus bid proposed on Tuesday. AB InBevadded a pound per share to its cash offer to quash investordissent over an offer made less attractive by a fall in thesterling following Britain's vote in June to leave the EuropeanUnion. It has also hiked its share-and-cash alternative by 88pence.
"This offer is final and cannot be increased or otherwisechanged," Chief Executive Carlos Brito told a conference callafter the company's second-quarter results. "We believe therevised and final offer represents a compelling opportunity forall SABMiller shareholders."
SABMiller, with prized Latin American and African markets,has told employees to pause the integration of its operationswith those of AB InBev as the board weighs the sweetenedoffer.
Nevertheless, Brito said the two companies had madesignificant progress together since November on regulatoryissues, bond financing and asset disposals in the United States,China and Europe, as well as general integration planning.
"It remains our objective to close the transaction in 2016,"he said, declining to give further details on the plannedtakeover.
AB InBev's shares have yo-yoed according to the market'sperception of the chances of a deal, which AB InBev needs tocement future growth. It would also take a big hit on its poundhedges if the takeover fell through.
The shares fell sharply on Thursday after reports ofSABMiller's integration pause, and were up 2.9 percent on Fridayafter reports that a number of activist shareholders broadlybacked the deal.
Those include Elliott Capital Advisors, which has built up astake in recent weeks.
Aberdeen Asset Management on Tuesday called theoffer unacceptable, but AB InBev already has the backing of thetwo largest shareholders - Altria and Bevco, the SantoDomingo family investment vehicle - hold almost 41 percent.
Marshall Wace LLP, controlling just over 1 percent ofSABMiller stock, said on Friday it supported the offer.
"We are at a natural point for this business to move on andbecome part of a bigger company, so to reject this now, you justwonder what things would be like," said one of SABMiller's 20largest investors who declined to be named
Societe Generale analyst Andrew Holland said if the offerfailed then SABMiller shares would fall back to 40 pounds orbelow and it would be a hard task for the company to recoverthat value.
"If you bought in a long time ago at 10 pounds, you mightbe happy with 38, but more recent arrivals, of which there are anumber, will see their value destroyed," he said.
SABMiller shares were just below 44 pounds on Friday.
BRAZIL RECESSION
Brito was speaking after the company published itssecond-quarter results, exposing problems in Brazil andhighlighting the attraction of the less-developed andhigh-growth African markets that a SABMiller takeover wouldoffer.
AB InBev's core profit in the second quarter rose 4.3percent on a like-for-like basis to $4.01 billion, below theaverage Reuters poll forecast of $4.13 billion.
The company saw earnings growth in the United States andChina, but margin decline in Mexico and lower beer sales in itssecond-largest market, Brazil, due to a downturn that hasdragged on for more than a year.
The company sold 4.5 percent less beer in Brazil than a yearearlier in April to June, an improvement from the 10 percentdrop in the first quarter but below AB InBev's own forecasts.
It said it expected Brazil revenue this year to be similarto the level of 2015, down from previous guidance of growth by amid to high single-digit percentage.
But it also cut its guidance for cost of sales perhectolitre to a low single-digit percentage increase, from amid-single digit rise seen before, due to savings on procurementand efficiency and greater use of returnable bottles in Brazil.
The company has forecast that its revenue per hectolitreoverall will grow ahead of inflation, partly as it pushesdrinkers over to more expensive beers, but with challengingconditions in Brazil and China. (Additional reporting by Sinead Cruise, Esha Vaish and MaiyaKeidan; editing by Susan Thomas and David Evans)
