UPDATE 1-Heelys board rejects Skechers' sweetened bid

(Adds LOS ANGELES to dateline, deal details, background)

LOS ANGELES, Aug 19 (Reuters) - Heelys Inc (HLYS.O) on Tuesday said its board rejected Skechers USA Inc's (SKX.N) sweetened $142.8 million cash offer, saying it undervalued the company, known for selling sneakers with wheels in the heels.

"The Board believes the $5.25 offering price does not reflect the value of Heelys and that entering into discussions with Skechers based on their unsolicited proposal is premature at this time," Heely's Chairman Gary Martin said in a statement.

Skechers' latest bid of $5.25 per share followed an offer made on May 28, when Skechers proposed a purchase price of between $4.75 and $5.10 per share.

Shares of Heelys closed at $5.30 on Tuesday. (Reporting by Lisa Baertlein; editing by Carol Bishopric)