UPDATE 2-Korea Beral shares rally on Icahn M&A hopes

* Korea Beral shares up more than 11 pct

* Subsidiary of Icahn-controlled U.S. firm ups stake

* Korea Beral official says watching situation

* Analysts play down hostile takeover attempt

By Kim Yeon-hee and Jungyoun Park

SEOUL, Sept 1 (Reuters) - Shares in Korea Beral (024120.KQ) soared more than 11 percent after a unit controlled by activist investor Carl Icahn raised its stake in the car parts maker, fanning speculation about a possible unsolicited takeover bid.

F-M International Ltd, which belongs to auto parts maker Federal-Mogul (FDML.O), told South Korean regulators in a disclosure on Monday that it had raised its stake in Korea Beral to 29.20 percent as of Aug 25 from 28.69 percent.

Federal-Mogul is controlled by billionaire financier Icahn.

The move by F-M International had revived memories of Icahn and hedge fund firm Steel Partners working together in 2006 to press South Korea's top tobacco maker, KT&G (033780.KS), to increase corporate value.

F-M International has been increasing its holdings in Korea Beral since late last year via market trades, bringing its total stake closer to those of Korea Beral's two top executives with a combined 36.32 percent.

"We are watching the situation. There has been no proposal or talk yet from F-M International," a Korea Beral official told Reuters, declining to be named because he was not authorised to speak to the media.

A legal counsel for F-M International could not immediately be reached for comment.

Shares in Korea Beral were trading up 8.0 percent at 6,750 won as of 0257 GMT, coming off an early high of 6,960 won.

They scaled a record intraday high of 7,150 won last Friday.

Korea Beral, a maker of disc brake pads and drum brake linings, is listed on the junior Kosdaq market and has a market value of 71.9 billion won ($57.6 million).

Most of the fund managers and analysts contacted by Reuters said the stock was too small for them to follow.

MANAGEMENT CONTROL ?

South Korean media reports speculated the recent stake purchase might be aimed at securing management control over Korea Beral. But Juhn Chong-kyu, an analyst at Samsung Securities, played down the market talk, adding that the Icahn-controlled unit would probably want higher dividends or some sort of management participation.

In 2006, under pressure from Icahn and Steel Partner's Warren Lichtenstein, KT&G, the biggest tobacco company in South Korea, had vowed fat returns.

Icahn and Lichtenstein had offered KT&G's board to buy the tobacco firm, in what would have been the first unsolicited foreign takeover bid for a major Korean company.

But they have never filed an official tender offer.

"Local association of Icahn with cases such as KT&G is drumming up a hostile takeover hopes, but I do not think possibility of an M&A is significant," said Juhn.

"Korea Beral and F-M has had a long-term working relationship, and with Korea Beral having a good firm hand over domestic manufacturing and sales, there is little that F&M can gain by shaking the company, which will only dent its corporate value."

F-M International has maintained its status as Korea Beral's second-largest shareholder for more than a decade with a stake of between 20 and 30 percent. (Additional reporting by Shin Jieun; Editing by Ken Wills and Valerie Lee)