* Raises per-share price to 10 rand from 8.55 rand
* Cipla Medpro shares up 1 pct, slightly below offer price (Recasts, adds more details on price)
MUMBAI/JOHANNESBURG Feb 28 (Reuters) - Indian drugmaker Cipla Ltd offered over $500 million to buy out South African affiliate Cipla Medpro on Thursday, sweetening its bid by 17 percent after earlier talks stalled over price.
The board of Cipla Medpro, South Africa's third-largest generic drug firm, urged shareholders to vote for the cash offer, endorsing a deal that appeared to have fallen apart just weeks ago.
In November Cipla offered $215 million for 51 percent of the company, a price some analysts in South Africa said was too low.
Cipla said in a statement on Thursday it would offer 10 rand per share, up from its initial bid of 8.55 rand and valuing the company at around 4.5 billion rand ($508 million).
The offer represents a 30 percent premium to the last closing price before deal talks were first announced.
The acquisition, which would be the largest ever by an Indian company in South Africa, would give Mumbai-based Cipla a platform for expansion into the fast-growing continent, where demand for inexpensive drugs is soaring.
"With a 100 percent buy-out plan, Cipla will have good operational synergies in the African market," said Siddhant Khandekar, an analyst at ICICI Direct in Mumbai.
"However, it is difficult to predict if the payback would happen quickly."
Cipla supplies the bulk of the South African company's drugs through a long-standing agreement, however it has never owned a stake in the Cape Town-based company.
"South Africa is an attractive emerging market with strong projected growth for generics of approximately 14 percent per year for the next several years," Cipla Chief Executive Subhanu Saxena said.
Just days after the initial offer, Cipla Medpro won a 1.4 billion rand contract from the South African government to supply HIV/AIDs drugs to local hospitals, sending its shares above the offer price on speculation of a sweetened bid.
Cipla may have initially been reluctant to hike its offer given management turmoil at the South African firm.
Cipla Medpro's founder Jerome Smith quit as chief executive in October following accusations he had awarded himself bonuses and other payments without board approval.
The deal will require shareholder approval at a meeting in April, as well as approval from South Africa's government, which has scuppered cross-border deals in the past.
Cipla Medpro shares were little changed at 9.61 rand at 1148 GMT.
Cipla was advised by Morgan Stanley, while Absa Capital advised Cipla Medpro. (Editing by David Dolan and Helen Massy-Beresford)