UPDATE 5-Canon seeks printer power with $1.1 bln Oce bid

* Canon to offer 8.60 euros/share, including dividend

* Deal worth 1.5 bln euros including debt, other obligations

* Counterbid possible, perhaps from HP, Kyocera, others

* Some pref holders and shareholders support deal

* Oce shares up almost 70 pct at 8.60 euros

(Adds Oce CEO, analyst comment, updates shares)

By Kiyoshi Takenaka and Gilbert Kreijger

TOKYO/AMSTERDAM, Nov 16 (Reuters) - Japan's Canon (7751.T) plans to buy Dutch copier and printer maker Oce (OCEN.AS) for 730 million euros ($1.1 billion), in a challenge to rivals Ricoh (7752.T) and Xerox (XRX.N) in the hunt for growth.

Canon, the copier and digital camera maker, and Oce said in a joint statement Monday that Canon would offer 8.60 euros per share, or 730 million euros, for Oce's shares, a premium of 70 percent to Oce's Friday close.

Canon's offer comes a little over a year after Japanese rival Ricoh, the world's largest copier maker, bought U.S. office equipment distributor Ikon Office Solutions, dealing a blow to Canon which provided 60 percent of the products Ikon handled. [ID:nT119530]

Canon, the world's largest digital camera maker which derived 65 percent of 2008 sales from printers and copiers, Oce, and rivals have suffered from the economic slump forcing companies to cut office costs.

Oce, loss-making in the past two quarters, has been cutting costs and staff and paid no final dividend in 2008. Canon and Ricoh reported sharp falls in quarterly profit last month. [ID:nLC542401] [ID:nT203059]

Canon and Oce products have little overlap, with the Japanese company strog in regular office machines and mid- to lower-end production printers while Oce excels in high-end and advertisement-use large-sized printers, Canon said.

Production printers, or digital commercial printers, can produce manuals and direct mail items quickly and in large volume and are a fast-growing segment of the global market.

"Oce is too small to survive on its own. Due to the capital intensity you need scale, which Oce lacks," RBS analyst Wim Gille said in a note.

Oce had 2008 sales of 2.9 billion euros, one seventh of Canon's revenue from imaging products and printers. Canon had an 18.9 percent share in the global copier market in value terms in 2008, according to research firm Gartner, compared with 19.7 percent for Ricoh and 19.2 percent for Xerox.

Oce shares were up 70 percent at 8.60 euros by 1553 GMT, their highest level since June last year.

Including debt and other obligations, the deal values Oce -- which competes with Xerox (XRX.N) and Konica Minolta Holdings (4902.T) -- at about 1.5 billion euros ($2.2 billion), said OCE Chief Executive Rokus van Iperen, who has worked at the company for more than 30 years.

POSSIBLE COUNTERBIDDERS?

Most analysts said the bid price was good for Oce shareholders, though some did not rule out a rival offer, possibly from Hewlett-Packard (HPQ.N), Kyocera (6971.T), Xerox, Toshiba Corp (6502.T) or Konica Minolta (4902.T), which has a cross-selling agreement with Oce.

SNS Securities analyst Maarten Altena said the takeover price did "not imply a knock out bid", while RBS's Gille said Konica Minolta had most to lose from a deal with Canon due to the cross-selling agreement.

If there was a rival bid, it would probably be near the 10 euro level, Petercam analyst Eric de Graaf said.

Van Iperen declined to comment when asked what Oce would do if there was a rival bid.

Preference share holders Ducatus, ASR and ING -- which together hold 19 percent of Oce's voting rights -- agreed to sell their interests to Canon, while Oce shareholder Bestinver Gestion S.A. has agreed to tender its 9.5 percent stake.

Oce's management and supervisory boards will recommend the offer, Oce and Canon said.

Shares in Canon closed down 1.5 percent at 3,370 yen ahead of the announcement, underperforming the benchmark Nikkei average .N225, which gained 0.2 percent.

Mizuho Securities, acted as financial advisor to Canon, while Stibbe and Herbert Smith acted as legal advisors. ING Corporate Finance acted as financial advisor to Oce, Lazard acted as financial advisor to Oce's Supervisory Board, and De Brauw Blackstone Westbroek acted as legal advisor. ($1 = 89.60 yen = 0.6685 euros) (Editing by Joseph Radford, Mike Nesbit and Simon Jessop)