TOKYO, June 3 (Reuters) - Toyota Motor ( TM ) will

take private a key supplier of its group, it said on Tuesday, in

a $26 billion deal, marking a landmark repositioning of Japan's

most important corporation.

Under the terms of the deal, unlisted real estate

company Toyota Fudosan will launch a tender offer for shares of

Toyota Industries ( TYIDF ) for 3.7 trillion yen ($26 billion),

the companies said.

Separately, Toyota ( TM ) said it plans to buy back its own shares

from Toyota Industries ( TYIDF ).

Japanese companies have come under growing scrutiny from the

market regulator and investors in recent years about their

cross-shareholdings in affiliates and business partners,

sparking a rise in both management buyouts and acquisitions.

Many of the deals have been driven by expectations that a

corporate governance overhaul will bring better shareholder

returns.

Toyota ( TM ) had said in April it was considering

participating in a potential buyout of Toyota Industries ( TYIDF ) - a

move that sources have said would help improve the group's

corporate governance.

Toyota ( TM ) owned about 24% of Toyota Industries ( TYIDF ) as of September

last year, while Toyota Industries ( TYIDF ) held around 9% of the world's

biggest automaker and more than 5% of Denso ( DNZOF ), another

major Toyota ( TM ) supplier and Toyota ( TM ) group company.

Toyota Industries ( TYIDF ), formerly Toyoda Automatic Loom Works, was

founded in 1926 by Sakichi Toyoda to make automatic looms. An

automotive division within the company was set up and later spun

off as Toyota Motor ( TM ).

In addition to forklifts, Toyota Industries ( TYIDF ) manufactures the

RAV4 sport utility vehicle for Toyota ( TM ) and also produces car

parts such as engines, air-conditioning compressors, batteries

and converters.

($1 = 142.6500 yen)