Australia's government approved on Friday SABMiller's A$11.5 billion ($11.2 billion) deal to acquire Foster's Group Ltd under foreign acquisitions laws, but imposed conditions requiring the company to keep brewing operations in Australia.

The government approval is the final regulatory condition to be cleared ahead of the Foster's shareholders vote set for December 1, which is expected to pass the deal.

Treasurer Wayne Swan, who also approved acquisition of the remaining 50 percent of Pacific Beverages now owned by Coca-Cola Amatil, said SABMiller must keep management of the iconic Australian beer brand in Australia.

SABMiller must also continue to invest in Foster's, the maker of Victoria Bitter, Carlton Draught and Pure Blonde, and not shift any of Foster's existing brewing facilities offshore to produce beer for the Australian domestic market, he said.

SABMiller has agreed to a number of undertakings which recognize the significance of Foster's to our economy and to our community, and support Australian jobs, Swan said in a statement.

SABMiller last week raised its cash takeover offer for Foster's to A$5.40 a share to make up for the loss of a 30 cents capital return after a tax ruling from Australian authorities.

The move made no difference to the total enterprise value of the deal, including debt.

The takeover requires approval of 75 percent of votes the December 1 meeting and has wide support from institutional investors.

SABMiller said the undertakings it had agreed with the Australian government on the takeover of Foster's were consistent with its plans for the business.

Given the local nature of Foster's brewing business and its focus on Australian customers, these undertakings are consistent with our current intentions for the business, and will not affect our ability to integrate Foster's and PacBev or to compete effectively in Australia, the UK-based brewer said in a statement.

SABMiller expects its biggest ever takeover deal to close by the end of the year and put it at the head of the Australian beer market with a near-50 percent share.

Growth in sales is expected to slow in 2011-12 as competition intensifies and the battle for market share depresses prices and margins.

Traditional brewers are also under increasing competition from smaller craft brewers in a local alcohol market expected to be worth around A$30 billion by 2016.

The Fosters deal is part of SABMiller's strategy of creating an attractive global spread of businesses to add to operations largely in the emerging markets of Africa, Latin America, Asia and Eastern Europe, but also in the United States.

The London-based brewer of Peroni, Miller Lite and Grolsch launched its initial bid for Foster's at A$4.90 a share, on June 21 and then went hostile by taking the offer direct to shareholders at the same price on Aug 17, but Foster's rejected both as being too low.

Peace broke out in the acrimonious battle after SABMiller offered to raise its cash bid to A$5.10, and Foster's shareholders would get the capital return and keep Foster's final dividend of 13.25 cents.

Foster's has been struggling with declining volumes as demand for traditional beers falls, and its market share has fallen to 50 percent from 55 percent.

Foster's has retreated back into Australia, giving up its global beer empire and split its wine business in May, paving the way for a sale of the beer business that boasts one of the industry's highest profit margins.

Shares in Foster's traded at A$5.38, reflecting expectations the deal will complete before year end.

($1 = 1.0290 Australian dollars)

(Reporting by Rob Taylor; Additional reporting by Victoria Thieberger in Melbourne; Editing by Lincoln Feast)

Australia Sale