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UPDATE 2-Thyssenkrupp raises $1.7 bln to fund industrial goods businesses

* Share sale comes after preliminary deal on steel merger

* Company looking to reduce debts, fund investment

* Thyssenkrupp shares down 1 pct (Recasts, adds context, shares, analyst comment)

FRANKFURT/BERLIN, Sept 26 (Reuters) - Thyssenkrupp raised almost 1.4 billion euros ($1.7 billion) from institutional investors on Tuesday to help fund the industrial goods businesses that will stay with the firm after the planned merger of its steel operations with Tata Steel next year.

The German steel-to-elevators group needs to strengthen its balance sheet, part of the motivation for the planned merger which is unlikely to be completed before late 2018.

"We will use that time to strengthen our industrial goods businesses right away," said Chief Executive Heinrich Hiesinger. Thyssenkrupp makes everything from car components, ships and industrial plants to elevators and submarines.

Thyssenkrupp's gearing, or debt to equity ratio, stood at 281.5 percent at the end of the third quarter. The group hopes to bring this down after shifting 4 billion euros in liabilities to the steel joint venture to ease the burden on its finances.

To help fund growth at the remaining businesses, the group issued 56.59 million new no-par-value bearer shares at a price of 24.3 euros, just below Monday's closing price of 24.7 euros.

Thyssenkrupp shares were down 1 percent to 24.45 euros by 0803 GMT and were among the biggest decliners in a flat German DAX index.

The group last week unveiled a long-awaited plan to combine its European steel business with those of Tata Steel to create the continent's second-biggest steelmaker after ArcelorMittal.

Thyssenkrupp hopes to sign a joint venture contract with Tata Steel in the first quarter of 2018, with closing of the potential deal, still subject to approval by regulators and the groups' steering committees, later that year.

The 1.38 billion euros in proceeds from the new shares will be used to boost growth in the areas of "urbanisation, mobility and services while driving forward necessary restructuring initiatives at a faster rate", it said.

BNP Paribas, Commerzbank and JP Morgan managed the sale.

Thyssenkrupp last month said it would cut up to 1,500 additional jobs at its industrial solutions unit, which engineers plants and build ships and has been plagued by low-margin legacy orders and poor demand for chemical plants.

The capital raising "provides financial flexibility to pursue a variety of restructuring and growth opportunities and allows the company to develop strategy without being hamstrung by elevated gearing," analysts at Jefferies wrote.

($1 = 0.8443 euros) (Editing by Tom Brown and Mark Potter)