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TDK to Buy Germany's Epcos for Up to $1.9 Billion

Japan's TDK Corp plans to buy German electronic parts manufacturer Epcos for up to $1.9 billion, in a move to expand sales of industrial-use parts and cope with fierce price competition, a source close to the deal said on Thursday.

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TDK will launch a friendly tender offer for Frankfurt-listed Epcos and make it a subsidiary as early as autumn, said the source, who declined to be identified as he was not authorized to speak to the media.

The bid is likely to cost 150 billion yen-200 billion yen ($1.4 billion - $1.9 billion), he said, adding that TDK was set to make a formal announcement later in the day.

It will also report first-quarter earnings at 3.00 p.m. local time.

A successful deal would boost TDK's global market share of capacitors and inductors just as price falls hit earnings at bigger rivals such as Murata Manufacturing and Kyocera.

TDK, which makes tiny components used by the hundreds in mobile phones, personal computers and flat-panel televisions, aims to expand sales of industrial-use parts through the acquisition and slow the pace of price declines.

Epcos is Europe's biggest maker of passive electronic components that control the flow of electricity, supplying capacitors, inductors and surface acoustic wave parts for use in cars and consumer electronics.

Formed in 1989 as a joint venture between Germany's Siemens and Matsushita Electric Industrial, Epcos had sales of 1.4 billion euros ($2.2 billion) in the year ended September 2007.

Combined with Epcos, TDK's annual sales would total some 1.1 trillion yen, making it the second largest components maker in Japan after Kyocera, which logged sales of 1.3 trillion yen last business year.

TDK, which last year took over Alps Electric's hard drive head business, has been pursuing acquisitions to gain economies of scale needed to weather price falls.

In April, it said it expected net profit to fall 10 percent to 63 billion yen in the year to March 2009 on price falls, slowing global demand and a strong yen.