UPDATE 2-WPP takes legal action in spat with Asatsu-DK over Bain's $1.3 bln offer


* WPP says Bain's offer undervalues Asatsu-DK

* Asatsu-DK has said plans to terminate alliance with WPP

* WPP seeking arbitration, and preliminary injunction from court

* Other shareholders also say that Bain offer is too low

* Asatsu-DK's shares end flat, above Bain's offer price (Recast and writes through with details)

TOKYO, Nov 2 (Reuters) - Advertising giant WPP said on Thursday it was taking legal action against its partner Asatsu-DK Inc, deepening an acrimonious spat over the Japanese firm's backing for a $1.3 billion buyout offer from Bain Capital.

WPP, which holds 25 percent of Asatsu-DK, as well as other shareholders have said the bid by the U.S. private equity firm significantly undervalues the company.

Last month, Asatsu-DK said it had told WPP that it planned to end their two-decade business alliance and that it had asked WPP to sell its shares to Bain.

It argues that according to their contract, if WPP does not sell its shares to Asatsu-DK or a nominated party within a year of Japanese firm's notification to terminate their alliance, WPP must sell its shares to the general public in the market.

In response, the world's largest advertising agency said on Thursday in an emailed statement that it was seeking arbitration with a Japanese arbitration body and a preliminary injunction with the Tokyo District Court.

In both cases, it is asking for a declaration that Asatsu-DK's planned termination of their business alliance was invalid and that Asatsu-DK had no right to request or require WPP to sell its shares.

A representative for Bain said the firm was confident that the contract would stand up in court.

Bain has offered 3,660 yen per share in its tender offer, which started Oct.3 and is due to remain open until Nov. 15. It is seeking a stake of at least 50.1 percent.

Shares in Asatsu-DK, which have traded above that level on hopes that Bain will sweeten its bid, closed down 0.4 percent on Thursday at 3,740 yen.

Apart from WPP, London-based fund manager Silchester International and Hong Kong-based activist hedge fund Oasis Management Company have also said Bain's offer is too low.

Silchester owns 17 percent of Asatsu-DK and Oasis' holding is less than 5 percent.

Asatsu-DK and WPP formed their alliance in 1998 to set up joint ventures, cultivate clients together, and exchanged equity stakes, but the Japanese firm says that synergies from the tie-up failed to materialise. ($1 = 113.9100 yen) (Reporting by Junko Fujita; Writing by Miyoung Kim; Editing by Edwina Gibbs)