TOKYO (Reuters) - U.S. buyout firm KKR said on Wednesday it has agreed to buy Hitachi Ltd's (>> Hitachi, Ltd.) chip-making equipment and video solution unit in a deal valuing the company at 257 billion yen (1.79 billion pounds), its second purchase of a Hitachi unit.

After completing the acquisition of Hitachi Kokusai Electric (>> Hitachi Kokusai Electric Inc), KKR will spin off the chip-making equipment unit, retaining 100 percent ownership of that business.

It will sell a 40 percent stake in the video solutions business to Hitachi and a Japanese investment fund, Japan Industrial Partners Inc (JIP).

This is KKR's second acquisition of a business owned by Hitachi, following its purchase of power-tool unit Hitachi Koki Co for about 150 billion yen ($1.35 billion) in January. Hitachi is reorganising its business structure.

KKR has been taking advantage of Japanese conglomerates' need to streamline their businesses. KKR last year also bought an auto parts maker backed by Nissan Motor Co (>> Nissan Motor Co Ltd) for about 500 billion yen ($4.5 billion) as Nissan is shifting its focus to new technologies.

In the latest deal with Hitachi, KKR initially plans to buy a 48.33 percent stake of Hitachi Kokusai at 2,503 yen per share for 124 billion yen ($1.1 billion) through a tender offer.

Separately Hitachi Kokusai will buy a 51.67 percent stake of its own shares held by Hitachi at 1,710 yen a share from Hitachi to cancel the shares.

(Reporting by Junko Fujita; Editing by Christian Schmollinger and Adrian Croft)

By Junko Fujita