UPDATE 1-Japan's Olympus to raise up to $1.17 bln in share issue
* Olympus to issue up to 37 billion new shares on overseas markets
* Company will invest 97.7 billion yen in its medical business
* Share price has now recovered after 2011 accounting scandal
TOKYO, July 8 (Reuters) - Japan's Olympus Corp said it will raise up to 118 billion yen ($1.17 billion) in a new share issue to expand its medical equipment business and rebuild its financial health, after an accounting scandal plunged the company into the red.
The shares will be offered to overseas investors, mainly in the United States and Europe, the world's biggest endoscope maker said in a statement on Monday.
Olympus, which counts Sony Corp as its largest shareholder, is marketing its shares to foreigners as Prime Minister Shinzo Abe's economic stimulus measures boost global appetite for Japanese shares.
The company's shares lost more than 80 percent of their value in the months following a $1.7 billion accounting fraud. They are now about one-quarter above their pre-scandal level, rebounding in line with a Japanese stock market rally.
Olympus became entangled in one of Japan's biggest accounting scandals in October 2011 as its British chief executive turned whistleblower and revealed details of investment losses the camera and medical equipment company hid for decades.
The latest share offering was announced less than a week after guilty verdicts and suspended sentences for three former executives marked the end of the scandal.
Last year Olympus raised 50 billion yen through a third-party allocation of shares to business partner Sony.
Olympus will use the bulk of the funds it is raising to bolster its medical business, including 19.7 billion yen to build three medical equipment factories. Two will be located in Fukushima prefecture, the site of the 2011 nuclear disaster.
It will issue 32 million new shares with an option to sell as many as 5 million additional shares in an overallotment.
Olympus, which controls roughly 70 percent of the global market for gastrointestinal endoscopes, will also sell 4 million of its own common stock.
The shares will be sold through brokerages SMBC Nikko Capital Markets, UBS Limited and Morgan Stanley.
Many Japanese companies are tapping the rallying domestic market to raise funds, with foreign investors helping to boost share prices.
Dentsu Inc, Japan's largest advertising agency, last week said it would raise about 120 billion yen from the sale of new shares and treasury stock to help pay down debt for an acquisition.
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