UPDATE 2-Japan's Mitsubishi Chem to take control of Taiyo Nippon

Tue May 13, 2014 4:48am EDT

(Recasts with announcement by both companies)

TOKYO May 13 (Reuters) - Japan's Mitsubishi Chemical Holdings Corp said on Tuesday it would buy a majority stake in industrial gas provider Taiyo Nippon Sanso for more than 100 billion yen ($980 million) to provide nitrogen and other gases for its overseas production facilities.

Japan's biggest chemical company said it is seeking to increase its stake in Taiyo Nippon to up to 51 percent from 27 percent and is offering 1,030 yen per share, a 16 percent premium to Taiyo Nippon's closing price on Tuesday.

In a joint statement, Taiyo Nippon said it would agree to the offer.

The takeover will help consolidate Mitsubishi Chemical's position in the U.S. petrochemicals sector, which is flourishing thanks to an abundance of cheap gas from shale formations. Japanese chemicals makers are expanding overseas to counter a shrinking domestic market shrinks as the population declines.

Mitsubishi Chemical, which raised its interest in Taiyo Nippon to 27 percent from 15 percent in October, said it will mount a tender offer in early November to increase its stake to after clearing necessary procedures of global competition laws.

Mitsubishi Chemical has been expanding through acquisitions as it consolidates its domestic businesses, including withdrawing from styrene monomer operations and scrapping one of its naphtha crackers.

Taiyo Nippon is a supplier of industrial gases including nitrogen, which is required in large quantities when producing chemicals such as ethylene from shale gas. Industrial gases are used at shale gas extraction sites as well. Taiyo Nippon has extensive operations in the United States.

Mitsubishi Chemical will supply nitrogen and other gases to U.S. facilities built in partnership with Dow Chemical to produce acrylic resin materials, the Nikkei newspaper reported earlier.

The newspaper said Mitsubishi Chemical was planning to install Taiyo Nippon gas production equipment at U.S. chemical plants of other companies.

In the statement, Mitsubishi said it and Dow were considering cooperating, but did not give further details.

JPMorgan Securities Japan advised Mitsubishi Chemical, while Taiyo Nissan was advised by Mizuho Securities. ($1 = 102.1150 Japanese Yen) (Reporting by Sneha Banerjee in BANGALORE and Osamu Tsukimori in TOKYO; Editing by Aaron Sheldrick and Miral Fahmy)