UPDATE 1-II-VI withdraws offer to buy Zygo

* II-VI cites Zygo's reluctance to enter into talks

* Zygo shares fall 17 percent

March 9 (Reuters) - II-VI Inc (IIVI.O), which makes optical and electronic instruments, said it was withdrawing its offer to buy Zygo Corp (ZIGO.O) after the company rejected its proposal and refused to enter into talks.

Zygo shares fell 17 percent to $8.37 in early morning trade Tuesday on Nasdaq. II-VI shares rose 1 percent to $31.16.

In January, II-VI made an offer to buy Zygo, which makes optical metrology instruments, for $10 a share. But Zygo rejected the bid saying it was not for sale.

II-VI will focus on its existing businesses and other strategic opportunities, CEO Francis Kramer said in a statement. (Reporting by A.Ananthalakshmi in Bangalore; Editing by Ratul Ray Chaudhuri)