UPDATE 2-Komatsu to spend $400 mln to acquire Nippei Toyama

(Adds Komatsu and analyst comments)

By Yoko Kubota

TOKYO, Jan 16 (Reuters) - Komatsu Ltd (6301.T), the world's No. 2 maker of earth-moving equipment, said it would spend about $400 million to make machine tool manufacturer Nippei Toyama Corp 6130.T a wholly owned unit to help it expand its industrial machinery business.

Komatsu said the buyout would allow it to leverage Nippei Toyama's operations in fast-growing markets in Asia such as China and India.

"Improving our position in emerging markets, especially India and China, is of the utmost importance," Komatsu Chief Executive Kunio Noji told a news conference.

Komatsu gets the bulk of its profits from the production of construction machinery, a market in which it trails only Caterpillar Inc. (CAT.N), and it is keen to generate more revenue from the production of machines sold to manufacturers.

Komatsu makes press machinery for automobile bodies, while Nippei Toyama makes transfer machines used in processing auto engines.

"The two companies don't have any product overlap, and I think synergies will emerge," said Shinji Kuroda, senior analyst at Goldman Sachs Japan. "It will also allow Komatsu to offer a full production line to auto makers."

Komatsu, Nippei Toyama's top shareholder with a 29 percent stake, will offer 1,250 yen for all Nippei Toyama shares it does not own, a premium of 54 percent over Tuesday's close, in a bid to run from Jan. 22 to March 17.

Toyama shares were flooded with buy orders, with bids indicated at 910 yen, up the daily limit of 100 yen. Komatsu shares fell 7.4 percent to 2,365 yen, tumbling along with other exporters following falls on Wall Street and a stronger yen.

The 1.6 trillion yen ($15 billion) industrial machinery sector, with many small players and a shortage of young engineers, is seen as ripe for consolidation, Kuroda said.

Komatsu's Noji said he was interested in more acquisitions in the industrial machinery sector but no specific discussions were taking place.

Currently, 5 percent of Komatsu's annual sales, or around 100 billion yen, comes from its industrial machinery division. (Additional reporting by Aiko Hayashi; Editing by Mike Miller)