TOKYO, May 20 (Reuters) - Fast food operator KFC

Holdings Japan ( KFCKF ) said on Monday that a Carlyle

Group ( CG )-backed fund launched a tender offer for its shares in a

deal worth 135 billion yen ($863 million).

Crispy Holdings, which is wholly owned by Carlyle, will

offer 6,500 yen per share, a 20% premium to KFC Holdings Japan's ( KFCKF )

closing price on Monday. The tender offer will last from May 21

to July 9.

Buyout funds have been increasingly active in Japan as more

corporations step up sales of non-core assets or seek buyers due

to succession issues. The deal would be the third largest

private equity buyout this year, according to LSEG data.

KFC Holdings Japan ( KFCKF ) operates KFC ( YUM ) restaurants in Japan under a

master franchise agreement with Yum! Brands ( YUM ), which also

owns the Pizza Hut and Taco Bell chains.

KFC Holdings Japan's ( KFCKF ) board of directors will recommend the

company's shareholders tender their shares, a spokesperson for

Carlyle said.

Mitsubishi Corp ( MSBHF ), the biggest shareholder in KFC

Holdings Japan ( KFCKF ) with a 35% stake, said separately it would tender

all its shares to the offer.

On Tuesday morning, KFC Holdings Japan's ( KFCKF ) shares were

untraded amid a glut of buy orders, quoted up almost 18.5% at

its daily-limit high of 6,400 yen per share.

($1 = 156.4400 yen)

(Reporting by Kantaro Komiya, Anton Bridge and Rocky Swift;

Editing by Kim Coghill and Subhranshu Sahu)