(Updates with Hitachi CEO comments)
TOKYO, March 26 (Reuters) - Japan's Hitachi Ltd said on Friday it would merge its car parts affiliate Tokico Ltd into the main company to strengthen its auto components operations in a 37 billion yen ($349 million) share exchange.
Hitachi, which already has a 23.9 percent stake in Tokico, said the merger will be carried out on October 1 and Tokico shares will be delisted in late September.
One Tokico share will be exchanged for 0.521 Hitachi share, said Hitachi, Japan's largest electronics conglomerate.
Based on Friday's closing prices of 329 yen for Tokico and 829 yen for Hitachi, Tokico shares were valued at a 31 percent premium in setting up the exchange rate.
By integrating group resources, Hitachi will be better positioned to take advantage of the growing popularity of hybrid electric cars and increasing use of electronics in drive control systems, the company said.
"We are entering into a new period where auto mechanics, auto electronics, auto-related information technology and whole automobile culture will be changing," Hitachi Chief Executive Etsuhiko Shoyama told reporters.
"That gives us a great business opportunity."
Hitachi said it also plans to merge its unlisted and wholly owned auto parts subsidiary Hitachi Unisia Automotive Ltd in October.
After the mergers, Hitachi's auto component sales are expected to total 500 billion yen ($4.72 billion), or six percent of its projected group revenue of 8.35 trillion yen for the year ending on March 31.
Hitachi, which makes everything from nuclear power plants to rice cookers, aims to double its auto parts sales to one trillion yen by the year ending in March 2011. ($1=105.98 yen)