China's Ministry of Commerce has given conditional approval for Mitsubishi Rayon Co. (3404.TO) to buy Lucite International Group Ltd., mandating that the U.K.-company divest half its production capacity in China among other requirements.

In a statement on its Web site Friday, the Ministry of Commerce raised concerns that the deal would give the combined company a 64% market share in China for methylmethacrylate, or MMA, a compound used in the production of plastics.

The ministry said it will approve the deal if Mitsubishi Rayon and Lucite agree to its terms.

China's approval clears the way for the $1.6 billion deal to be closed around the end of May, Mitsubishi Rayon said Monday.

China's new anti-monopoly law allows the Ministry of Commerce to issue rulings on global mergers and acquisitions even if the companies involved aren't Chinese.

In November, the Ministry of Commerce approved the merger of Belgian-Brazilian beer giant InBev's acquisition of Anheuser-Busch Cos., but put restrictions on the combined firm's investments in China.

In a controversial ruling in March, the Ministry rejected the proposed purchase of Huiyuan Juice Group Ltd. by Coca-Cola Co.

In a note on Monday, U.S.-based law firm Orrick, Herrington & Sutcliffe LLP said the deal follows a "troubling pattern" similar to the Coca-Cola ruling, in that it doesn't give sufficient explanations or evidence to support its findings of anti-competive results from the merger.

Under the Ministry of Commerce's terms, Lucite International will have to spin off half of its production capacity in China within five years, and will have to sell MMA at cost to a third party in China.

Additionally, Lucite and Mitsubishi Rayon's China management must operate independently of one another while the divestiture is proceeding, the ministry said, adding that Mitsubishi Rayon will be barred from acquiring any Chinese producer of MMA or selected related products.

Mitsubishi Rayon will also be prohibited from building factories in China to make such products.

-By Aaron Back and J.R. Wu, Dow Jones Newswires; (8610) 6588-5848; aaron.back@dowjones.com