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UPDATE 2-Japan's Itochu boosts FamilyMart stake despite criticism over offer

* FamilyMart should have sought higher offer, activists say

* Itochu secures stake of over 65%

* Itochu aims to speed up turnaround at convenience store (Adds background on convenience store industry)

TOKYO, Aug 25 (Reuters) - Japanese trading house Itochu Corp boosted its stake in convenience store chain FamilyMart Co to about two-thirds after a $5.5 billion tender offer that was criticised by some activist investors as being too low.

Itochu, which already owned 50.1% of the FamilyMart chain, said on Tuesday it secured enough shares to take its stake to over 65%, making the tender offer successful.

Itochu had launched the tender offer to gain greater control of FamilyMart to speed up decision-making at the chain, which competes with 7-Eleven, part of retail giant Seven & i Holdings , and Lawson Inc, owned by rival trading house Mitsubishi Corp.

It had offered 2,300 yen per share, compared with their price of 1,766 yen before the announcement, with a plan to delist FamilyMart.

Activist fund Oasis Management had said that FamilyMart, by not demanding a higher price, had neglected minority shareholders and should pay a special dividend to compensate.

FamilyMart had supported the offer with the caveat that shareholders should decide for themselves whether the price was adequate.

The stores, ubiquitous in Japan and offering everything from “bento” pre-made meals to socks and underwear, have been hit by the pandemic as more people have stayed at home.

But the stores had already been facing slower growth in recent years. In addition to a shrinking population and sluggish consumer spending, the industry is grappling with a shortage of workers and competition from drugstores, which started selling food following deregulation.

Itochu has said it plans to use its investment and expertise in other food operations to bolster FamilyMart’s business. Itochu acquired Dole Food Company’s Asian fresh produce and worldwide packaged food business in 2013.

The latest move also allows the trading house to shift further away from the struggling energy and mining businesses to focus on the consumer sector.

FamilyMart shares closed on Tuesday at 2,295 yen, up 1.7%. Itochu shares ended 0.7% higher. ($1 = 106.0500 yen) (Reporting by Ritsuko Ando; Additional reporting by Junko Fujita; Editing by Chris Gallagher and Muralikumar Anantharaman)

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