UPDATE 1-Abu Dhabi state fund offers $1.8 bln for Chartered

* ATIC offers S$2.68 a share to buy Chartered Semiconductor

* Chartered’s major shareholder Temasek supports the deal

* Second major investment by Abu Dhabi firm in chip sector

* Chartered shares suspended, have more than doubled in 2009

(adds detail on bid, ATIC)

SINGAPORE, Sep 7 (Reuters) - Abu Dhabi's state fund ATIC has offered S$2.68 a share in cash to buy Singapore chip-maker Chartered Semiconductor CSMF.SICHRT.O, valuing the firm at $1.8 billion.

This would be the second major investment by Advanced Technology Investment Co (ATIC )in the global microchip industry after it agreed in March to pay $2.1 billion for 55.6 percent of a joint venture with Advanced Micro Devices Inc AMD.N (AMD), creating Globalfoundries.

Chartered ranks alongside China's Semiconductor Manufacturing International Corp (SMIC) 0981.HK, and trails larger rivals TSMC 2330.TW and UMC 2303.TW, which own about a two-thirds share of the $20 billion chip foundry market.

Singapore Temasek Holdings [TEM.UL], which has a 62 percent stake in Chartered, fully supports the acquisition, Chartered said in a statement.

Chartered shares, which closed on Friday at S$2.66, have more than doubled this year on speculation about a takeover.

The transaction, which is subject to regulatory and shareholders’ approval, is expected to close during the fourth quarter.

Chartered said the deal represents an equity value of approximately S$2.5 billion, and a total value of approximately S$5.6 billion ($3.9 billion) including debt and convertible redeemable preference shares.

“We believe that by having access to ATIC’s long-term capital and related -assets, Chartered has an opportunity to bring its skills, capabilities and leadership to the next level,” Chairman ATIC Waleed Al Mokarrab said.

ATIC is expanding its investments in the semiconductor industry which currently consist of a Globalfoundries facility in Dresden, Germany and a new, state-of-the-art facility under construction in New York, it said.

Doug Grose, chief executive officer of Globalfoundries, would serve as CEO of the combined operations, with Chia Song Hwee, CEO of Chartered, as chief operation officer after the deal is completed.

ATIC is fully owned by the Abu Dhabi government.

Morgan Stanley MS.N and and Citigroup C.N advised Chartered. Deutsche Bank DBKGn.DE will advise Chartered shareholders.

Chartered booked a net loss of $39.4 million including a tax benefit in the second quarter, marking its fourth straight quarterly loss.