Toshiba Machine Co, NuFlare's second-largest shareholder and a former subsidiary of Toshiba Corp, said on Wednesday it would sell its 15.8% stake in NuFlare to its former parent, shrugging off a higher counter offer by Hoya Corp.

The tender by Toshiba Machine would allow Toshiba to secure more than two-thirds of NuFlare.

Toshiba, which already holds 52.4% of NuFlare, is aiming to take full control of the chip equipment maker as the Japanese government pointed to corporate governance issues with dual listings of parents and subsidiaries.

Optical products maker Hoya has offered 12,900 yen per NuFlare share or $1.4 billion - a rare unsolicited bid in Japan, topping Toshiba's offer of 11,900 yen for each share it does not own.

It wants at least two-thirds of NuFlare, meaning Toshiba would need to sell part of its stake, but Toshiba's board has decided not to accept Hoya's offer, saying the chip equipment unit is core to the group.

In choosing Toshiba's offer over Hoya's, Toshiba Machine said in a statement Hoya's takeover was unlikely to succeed due to Toshiba's decision not to sell.

Toshiba Corp currently owns less than 3% of Toshiba Machine.

(Reporting by Makiko Yamazaki, editing by Louise Heavens and Elaine Hardcastle)