UPDATE 3-Dress Barn to buy Tween Brands in $157 mln stock deal

* All-stock deal values Tween Brands at $6.22 a share

* Offers 20 percent premium to Tween's Wednesday close

* Dress Barn sees deal neutral in 1st year

* Tween's shares up 32 pct; Dress Barn up 11 pct (Adds background, details from filing, conf call)

BANGALORE, June 25 (Reuters) - Dress Barn Inc (DBRN.O) agreed to buy teen-apparel seller Tween Brands Inc TWB.N for about $157 million in stock, as the women's clothing retailer looks to capture a larger share of the tween girls' apparel market.

The deal values the operator of the Justice retail chain at about $6.22 a share, representing a premium of 20 percent to Tween Brands' Wednesday close of $5.18.

The news sent Tween Brands' shares up about 32 percent to $6.83 on the New York Stock Exchange, while Dress Barn's shares rose as much as 11 percent to $14.67 Thursday afternoon on Nasdaq.

"The Justice brand is an excellent complement to our existing businesses as it diversifies us into a new and attractive demographic," Dress Barn CEO David Jaffe said on a call with analysts.

Dress Barn, which operates the namesake chain for women and the Maurices chain for twentysomethings, would now have an opportunity to reach out to tweens through the Justice label that focuses on girls aged 7 to 14 years.

Additionally, Tween Brands CEO Michael Rayden said his customers would complement Dress Barn's older clientele.

"If a Dress Barn customer is in her 40s and if the Maurices customer is in her mid-20s...those are my girls' moms," Rayden said.

Dress Barn, which expects to realize economies of scale in areas such as sourcing and real estate areas, said it sees the deal being neutral to earnings in the first full year of combined operations and adding to profit thereafter.

The women's clothing retailer said it sees "some immediate opportunities in terms of duplicative public company costs."

Although it refused to shed more light on the specifics of possible cost savings, Dress Barn's Jaffe said the company has been "extremely conservative" in its assumptions about synergies.

DEAL TERMS

Under the deal, each common share of Tween Brands will be exchanged for 0.47 shares of Dress Barn common stock.