NEW YORK, AUG. 25 -- Reichhold Chemicals Inc. today agreed to a sweetened $60 a share cash buyout offer from Japan's Dainippon Ink & Chemicals Inc., in a deal the companies valued at about $600 million.

Word of the agreement came hours after Dainippon, which had a hostile $473 million buyout offer pending, and Reichhold disclosed they were engaged in merger negotiations following months of sometimes sharp exchanges between the two companies.

The board of directors of Reichhold, a White Plains-based producer of adhesives and polymers, unanimously approved the sweetened offer and indicated it would recommend that shareholders tender their stock to Dainippon.

The board had rejected as inadequate the unsolicited $52.50 a share tender offer Dainippon launched on June 25 and said it would consider alternatives that might include a buyout by another company.

Dainippon, one of Japan's biggest diversified chemical companies, already owns about 4.5 percent of Reichhold's 9 million common shares and equivalents outstanding.

Eugene Stevenson, a Reichhold spokesman, said his company valued the buyout at about $600 million, including the stock purchase, conversion of debt and other costs.

Under the agreement, Reichhold granted Dainippon an option to purchase 1.38 million shares of Reichhold stock and agreed to pay Dainippon a $9.2 million "breakup fee" in the event the merger was terminated under certain circumstances.

Such provisions generally are granted to discourage competing bidders.

The companies also agreed to terminate pending litigation stemming from the hostile bid.

"This offer represents excellent value for our shareholders," C. Thomas Powell, Reichhold's chairman and chief executive, said in a statement. "At the same time, it creates a business combination that makes very good sense long-term."

Shigekuni Kawamura, president of Dainippon, said that the merger would help Dainippon reach its goal of being a leader in its key market segments, such as its ink and chemicals businesses.

Reichhold stock rose $1.62 1/2 to $59.62 1/2 in active trading on the New York Stock Exchange.

Reichhold shares had traded in the low $40 range just before Dainippon's bid, and soared to more than $64 in the weeks following the offer before settling back.

Last month, following Reichhold's rejection of its bid, Dainippon indicated it was prepared to reconsider all aspects of the offer and might sweeten the bid. Reichhold later agreed to provide Dainippon with the same nonpublic financial information it had given to other prospective bidders, and Dainippon agreed not to acquire more Reichhold shares.

Dainippon on July 22 notified the Reichhold board that it was not yet prepared to sweeten its offer and cautioned the company not to grant any rival bidder special stock options or other provisions to discourage other suitors.

Powell had responded that his company did not intend "to be held hostage to arbitrary conditions that could inhibit our ability to act in our shareholders' best interests."

Dainippon's tender offer, which it recently extended to Aug. 28, was conditioned on a majority of Reichhold shares being tendered and on the Reichhold board revoking its "poison pill" takeover defense.

Dainippon, which had about $2.6 billion in sales during the year ended March 31, is considered one of the more aggressive Japanese companies in acquiring U.S. companies.

Dainippon last year unsuccessfully bid for Sun Chemical Corp. before Sun merged with Chromalloy American Corp. Dainippon later acquired Sun Chemical's graphic arts materials group for $550 million. Dainippon also has made several smaller U.S. acquisitions.

Reichhold earlier this month said its second-quarter net income fell sharply because of $2.9 million in expenses stemming from its resistance of the hostile takeover bid.

Reichhold had a second-quarter profit of $1.9 million, or 25 cents a share, compared with $11.1 million, or $1.50 a share, a year earlier. Sales fell to $208 million from $212.7 million.

For the first six months of the year Reichhold had a profit of $5.3 million, or 71 cents a share, down from $12.4 million, or $1.67 per share. Revenue dropped to $391.8 million from $422.4 million.