UPDATE 4-Mitsubishi Chem to buy Mitsubishi Rayon -Nikkei
* Deal worth up to $2.1 bln - Nikkei
* Mitsubishi Chem says "won't deny" considering acquisition
* Mitsubishi Rayon agrees $1 bln JV with Saudi SABIC
* Mitsubishi Chem up 4.7 pct, Mitsubishi Rayon soars 20 pct (Adds details, background)
TOKYO, Aug 10 (Reuters) - Mitsubishi Chemical Holdings (4188.T), is in talks to buy smaller rival Mitsubishi Rayon (3404.T) for up to $2.1 billion, the Nikkei business daily reported, in a move that would help consolidate Japan's overcrowded chemicals sector.
A spokesman for Mitsubishi Chemical, the country's largest chemicals firm, said he "wouldn't deny" that Mitsubishi Rayon was on a list of businesses it was considering for purchase, but declined to comment further.
A deal would not likely change Mitsubshi Chemical's global ranking of No. 14 in terms of chemical sales, but it would add key specialised materials to its product lineup to help it compete with larger rivals such as BASF (BASF.DE).
Mitsubishi Chemical shares rose 4.7 percent, while shares in Mitsubishi Rayon, the world's No. 1 maker of materials used for acrylic resin, jumped by a fifth to a one-year high in its most active day of trade in at least 24 years.
"If the report is true, it is positive and a big surprise," Nomura analyst Shuichi Nishimura wrote in a note.
"It would be industry consolidation, which we have been saying is necessary for the Japanese chemicals sector," he said.
The deal, if agreed to at the top of the estimated price range, would be the fifth largest by a Japanese company this year, Thomson Reuters data showed.
Global chemicals companies such as global leader BASF are trying to focus on specialised compounds that command premium prices, dropping businesses faced with competition from low-cost countries.
Mitsubishi Chemical has been downsizing its petrochemical operations, which have been losing out to Middle Eastern and Chinese rivals. Instead it wants to build up its offering of value-added materials to catch up with BASF, Dow Chemical (DOW.N) and other major players.
"The deal would give them a chance to focus on high-end, high-performance resins and distance themselves from fierce price competition in basic petrochemical products," said Nobuhito Owaki, analyst at J.P.Morgan Securities.
"Both of them make LCD panel components, but with little overlap in actual products, and both firms offer carbon fibre, which has long-term growth potential," he said. Continued...
