updated 3/9/2006 8:07:04 AM ET 2006-03-09T13:07:04

Investors led by U.S. billionaire Carl Icahn said Thursday they were ready to consider raising their informal offer to acquire South Korea’s former government tobacco monopoly, but stopped short of making a formal bid.

In a letter addressed to KT&G Corp. CEO Kwak Young-kyoon made public in a press release, the investors said they were ready to raise their previous offer of $61 (60,000 won) a share, though emphasized KT&G would need to convince them a higher price was warranted.

That offer, made in a letter last month, valued KT&G at about $10 billion. In Thursday’s correspondence, the investors suggested they might be willing to raise it to $71 (70,000 won) a share or higher.

Three funds controlled by Icahn, including Icahn Partners Master Fund LP, have combined forces with Steel Partners II LP to pressure KT&G, South Korea’s former government tobacco monopoly.

Last month, they said they had amassed a 6.72 percent stake in KT&G to become the second largest shareholder. They are battling with the company’s management for votes in a shareholders meeting on March 17, where two new outside board members will be elected.

“We urge you and the other members of KT&Gs board of directors to seriously consider our proposal,” Warren Lichtenstein, managing member of Steel Partners, wrote in Thursday’s letter to Kwak. “As with our prior letter, this is an invitation to discuss our proposal and is not the commencement of a tender offer.”

Simon Lee, a spokesman for KT&G, said the company had no immediate reaction to the letter.

The tussle has grabbed headlines in South Korea, where investor activism is rare. Icahn’s prominence in the United States, where he recently fought a high-profile battle with media giant Time Warner Inc., has also fueled interest.

Icahn and Lichtenstein want KT&G to implement changes to bolster its share price, including the listing of a unit that makes products related to the ginseng root, popular in Asia for its perceived health benefits, and selling idle real estate assets.

If the attempt to purchase the company succeeds, it would be the first unsolicited buyout of a major South Korean company by overseas investors.

KT&G shares rose 1.8 percent Thursday.

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