April 9 (Bloomberg) -- Shares of Pentax Corp., a Japanese camera and medical equipment maker, surged after Hoya Corp. said it plans to increase a takeover offer for the company and pay with cash instead of stock.

Pentax's stock rose 9.1 percent to 800 yen at the Tokyo close, the biggest gain in 18 months. Hoya, Japan's largest maker of optical glass, will hold a board meeting tomorrow morning to approve an offer of about 770 yen a share to Pentax shareholders, said Hiroko Yamamoto, a Hoya spokeswoman in Tokyo.

``The board meeting hasn't been held yet so there is a possibility of revising the price,'' Naoji Ito, a Hoya investor relations executive, said earlier today. ``The 770 yen offer is not fixed at this moment.''

The new cash offer, which values Tokyo-based Pentax at 98.5 billion yen ($830 million), is worth 17 percent more than an earlier agreement to pay Pentax shareholders 0.158 of Hoya stock in a merger. Pentax President Fumio Urano and Chief Financial Officer Katsuo Mori will resign in May after the other six Pentax board members rejected their plan for the stock transaction.

``Given that Pentax has businesses that have potential to grow such as medical instruments, 770 yen is appropriate,'' said Mitsushige Akino, who oversees $468 million in assets at Ichiyoshi Investment Management Co. ``Urano's resignation will allow Hoya proceed with the restructuring of Pentax. I see it as positive news.''

Hoya's original offer would value Pentax at about 656 yen apiece at today's share price. Hoya is expanding sales of medical equipment, such as endoscopes and surgical scissors, to help cut reliance on glass substrates used in semiconductor manufacturing. Hoya plans to double sales in the medical business to 100 billion yen, the glassmaker said in December, without giving a timeframe.

The two Tokyo-based companies said on Dec. 21 that they would create Hoya Pentax HD Corp. from Oct. 1. UBS AG is advising Hoya on the acquisition and Morgan Stanley is working with Pentax.

New President

Takashi Watanuki, a Pentax senior executive officer, will become president, spokesman Jiro Okamura said today. Watanuki, 54, started at the company 29 years ago, and was previously head of the Philippines unit. He's now in charge of corporate development.

All Pentax board members, excluding Urano and Mori, voted to cancel the merger with Hoya on April 4, two days before Hoya announced it would raise its takeover bid, the Asahi newspaper reported today on its Web site. The six board members who agreed to drop the merger plan will also reject Hoya's new proposal, the newspaper said, without saying where it obtained the information.

Pentax plans to hold a board meeting tomorrow, Okamura said, without providing a specific time.

Shares of Tokyo-based Hoya gained 1 percent to 4,140 yen. The stock has dropped 11 percent so far this year, against a 3 percent advance in the Nikkei 225 Stock Average. Pentax shares have risen 6.7 percent this year.

Medical Business

Urano, 64, who has headed the company for almost seven years, led Pentax back to profit in 2003 after three years of losses by focusing on higher-margin single-lens reflex cameras and medical equipment. The value of the company's stock more than tripled since he took over in June 2000. The company entered the endoscope business in 1977, according to its Web site.

Kyodo News reported earlier today that Urano would resign to take responsibility for agreeing to the stock transaction in December, without saying who provided the information. Pentax spokesman Ikuo Fujisato earlier declined to comment on the report.

To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Junko Hayashi in Tokyo at juhayashi@bloomberg.net.

Last Updated: April 9, 2007 02:28 EDT