UPDATE 4-Hitachi launches $2.9 bln bid for units, falls to loss

* Hitachi says to buy out five of 16 listed units

* Say won't absorb Hitachi Chemical, other materials units

* Says finances weak, looking at fund-raising options

* Qtrly net loss 82.7 bln yen vs 31.6 bln yen profit yr ago

* Shares in Hitachi down, units up (Adds analyst comment, executive comment)

By Mayumi Negishi

TOKYO, July 28 (Reuters) - Japan's Hitachi Ltd (6501.T) will launch a $2.9 billion bid for five of its listed units to help it return to growth, as its tumble to a quarterly net loss eats into its capital and puts more pressure on it to raise funds.

Japan's biggest electronics maker is trying to consolidate its sprawling operations and shift focus to its batteries, power systems and infrastructure businesses as it heads to a third straight year of losses and weaker finances. [ID:nT98959]

It said on Tuesday it will launch tender offers next month to buy the shares it does not already own in Hitachi Maxell 6810.T, Hitachi Plant Technologies Ltd 1970.T, Hitachi Information Systems Ltd 9741.T, Hitachi Software Engineering Co 9694.T and Hitachi Systems & Services Ltd 3735.T.

Hitachi will buy most of the shares with 273 billion yen in cash, with the exception of a share swap for a 5 percent stake in Hitachi Plant Technologies.

The announcement, along with Hitachi's fall to a quarterly loss amid weak microchip and electronics sales, sent its shares down 3.6 percent, erasing the gains it made the previous day when news of the unit buyout broke.

But shares in the units jumped towards their buyout prices.

"Hitachi's finances are frail, and continuing losses will deplete its cash even further," said Yuichi Ishida, an analyst at Mizuho Investors Securities. "For a company that prided itself on its financial solidity, this must be a tough situation to be in."

Large losses on flat TVs overseas and semiconductors have already torn into Hitachi's capital base, halving its shareholders' equity ratio in a year to 11 percent and putting pressure on it to raise money.

"We want a 20 percent shareholders' equity ratio to be within reach in 2011/12," Hitachi President Takashi Kawamura told a news conference, without elaborating. He added that Hitachi would not absorb specialised materials units such as Hitachi Chemical Co (4217.T).

Hitachi Executive Vice President Takashi Miyoshi said the company would be able to cover the cost of the tender offer with commitment lines from banks.

"If Hitachi issued new shares, it would be a hard sell right now, since it has yet to put forward a convincing road map back to profitability," Mizuho Investor's Ishida said.

Hitachi, a sprawling conglomerate with more than 900 group firms and 16 listed subsidiaries, is betting on the revenue inflow to its bottom line after making the five units wholly ownned, plus a faster time-to-market by bringing together its groupwide operations in system integration and batteries.

Hitachi, which lost $8 billion in the past business year -- a record for a Japanese manufacturer -- has said that an injection of public funds to bolster Renesas Technology is a possibility under legislation to help companies hit by the global financial crisis.

Renesas, Hitachi's microchip joint venture with Mitsubishi Electric (6503.T), is to merge with NEC Electronics (6723.T) in April.

The government has already said it will back chip maker Elpida Memory Inc 6665.T with funds.

Hitachi stuck to its forecast for a net loss of 270 billion yen for the year to March -- missing the consensus average for a 246 billion yen loss by 13 analysts polled by Thomson Reuters -- even as rivals Fujitsu Ltd (6702.T) and NEC Corp (6701.T) predict a return to profit.

Hit by weak sales of its flat TVs, microchips, car-making equipment and construction machinery, it reported a net loss of 82.7 billion yen for April-June, its fiscal first quarter.

That compared with a profit of 31.6 billion yen in the same period last year, and just missed an estimate by JP Morgan for a loss of 79.9 billion yen.

Some investors jumped on Hitachi shares on Monday on news of its plans to absorb the units, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"But they looked at the earnings figures today and realised they can't buy it," he said.

Hitachi posted an operating loss of 50.6 billion yen, down from a profit of 77.7 billion yen in the same quarter last year, on a 26 percent sales decline.

Hitachi's shares lost 3.6 percent on Tuesday, against a 1 percent fall in Tokyo's electrical machinery sub-index .IELEC.T. ($1=95.00 Yen) (Additional reporting by Aiko Hayashi; Editing by Michael Watson)