RPT-UPDATE 2-Japan's Daiwa to raise $2.5 bln in share sale

* Daiwa to use funds to expand retail and overseas business * New shares may dilute shareholders by about quarter * Follows overseas and domestic acquisitions

(Changes headline tag to say "Update 2" not "Update 1")

By Junko Fujita

TOKYO, June 26 (Reuters) - Japan's Daiwa Securities Group (8601.T) said it would raise about 240 billion yen ($2.5 billion) by selling shares and use the funds to expand its overseas and domestic retail operations.

Daiwa, Japan's second-largest brokerage after Nomura Holdings (8604.T), reported its third straight quarterly loss in April, but it has begun to expand its business as the economy has shown signs of recovering from the worst recession since World War Two.

It is Daiwa's first sale of new shares in 20 years, but the new issue will increase the number of its shares outstanding by about a quarter.

Daiwa said on Friday it would issue up to 345 million new shares and sell roughly 58 million of its own shares in Japan and overseas.

Daiwa Securities SMBC, Deutsche Bank AG (DBKGn.DE), SMBC Friend Securities and Mitsubishi UFJ Securities will arrange the sale. Daiwa will be joining Nomura, Sumitomo Mitsui Financial Group Inc (8316.T) and Mitsubishi Financial Group (8306.T) in boosting capital eroded by losses made amid the financial crisis.

The brokerage will set the selling price sometime from July 8 to July 13.

Last month Daiwa Securities SMBC Co, Daiwa's investment banking arm, agreed to buy the corporate finance unit of Britain's Close Brothers Group (CBRO.L) to accelerate its overseas expansion. [nT137393]

Earlier this month Daiwa said it would spend about $140 million to take a stake in a real estate investment trust (REIT) and buy the trust's asset manager from DaVinci Holdings (4314.OJ) to boost its property business. [nnT58298]

($1=95.86 Yen)

(Additional by Taiga Uranaka; Editing by Hugh Lawson)

((taiga.uranaka@thomsonreuters.com; +81-3-6441-1813; Reuters Messaging: taiga.uranaka.reuters.com@reuters.net))

((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)) Keywords: DAIWA/

(C) Reuters 2009. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nT322520