* Offer unchanged at 3,660 yen per share
* Tender offer deadline extended to Dec. 6
* ADK shares jump over 5 pct
* WPP could reinvest in ADK once offer completed (Adds further details)
By Junko Fujita and Kate Holton
TOKYO/LONDON, Nov 21 (Reuters) - Britain's WPP agreed on Tuesday to accept Bain Capital's offer for its stake in Japan's Asatsu-DK Inc (ADK), dropping its threat of litigation after agreeing plans to reinvest in the advertising group at a later date.
Led by high-profile businessman Martin Sorrell, WPP clashed with Bain last month when the U.S. private equity firm announced plans to buy Japan's third-largest advertising agency for $1.35 billion.
WPP, which owns 25 percent of ADK and partners with the group in cultivating clients, said the offer undervalued the company. On Tuesday it agreed to sell its ADK shares for 3,660 yen ($32.53) each, the same price it rejected last month.
The Japanese agency said WPP and Bain would now discuss the possibility of WPP holding about 25 percent of an entity that would own ADK. A source familiar with the situation said the threat of litigation had been aimed at ensuring WPP was not forced out of the Japanese company.
"The new agreement would enable the company to achieve that aim," the source said, on condition of anonymity.
Japan is the third largest ad market in the world and according to WPP's media investment arm GroupM, it will be the third largest contributor to global growth in advertising spend in 2017.
Like others, the Japanese market is undergoing a rapid transformation as money moves from traditional media outlets to digital. The industry is largely controlled by Dentsu and Hakuhodo DY Holdings, with ADK a distant third.
Bain made its initial offer after ADK asked it to buy WPP's stake to end a two-decade business alliance which ADK said failed to produce benefits.
ADK is now hoping to restructure to focus more on the fastest growing market segments such as mobile video advertising through its new partnership with Bain.
"We are very pleased that WPP has shown its support for the privatisation of ADK," David Gross-Loh, Managing Director at Bain Capital Private Equity, said.
ADK shares jumped more than 5 percent to 3,660 yen in Tokyo on Tuesday after initial reports of the deal, as investors bet on a successful offer by Bain for at least 50.1 percent.
The U.S. private equity fund said it had extended the offer to Dec. 6.
WPP would end arbitration and injunction proceedings if the tender offer succeeds, Bain said in its statement.
Other ADK shareholders such as London-based fund manager Silchester International Investors LLP and Hong Kong-based activist hedge fund Oasis Management Co Ltd have also previously said Bain's offer was too low.
Oasis declined to comment. Silchester could not be reached for comment. ($1 = 112.5100 yen)
Reporting by Junko Fujita in TOKYO and Kate Holton in LONDON; Editing by Christopher Cushing