"Merck’s proposal could reasonably be expected to result in a superior proposal," Versum, a maker of chemicals for the semiconductor industry, cited its board as saying in a statement on Friday.

However, the U.S. company again urged its shareholders to snub the hostile all-cash bid that Merck launched on Tuesday, adding its support for the tie-up with Entegris was unchanged for now.

The board "has authorized Versum's management and its advisers to engage in further discussions with, and provide non-public information to, Merck," the statement added.

Versum's share price, which dropped 27 percent last year, was up less than 1 percent on Friday afternoon, at $50.29, above the $48 a share offered by Merck.

Merck, a science company with three divisions that include speciality chemicals, welcomed Versum's move but maintained the pressure by keeping the June 7 deadline and all other terms of its tender offer unchanged, and by urging Versum investors not to back the Entegris deal.

Versum, the former speciality chemicals division of industrial gases group Air Products, has opposed Merck's bid since it was proposed last month, saying it was committed to the all-share merger with Entegris, agreed in January.

In a meeting between Versum Chairman Seifi Ghasemi and Merck Chief Executive Stefan Oschmann on Thursday - under a limited waiver granted by Entegris - Oschmann hinted at a sweetened bid, Versum said.

"Mr. Oschmann conveyed the possibility that Merck would improve the terms of the offer" after due diligence, Versum said in filings.

"As a disciplined buyer, we will begin a thorough due diligence process as soon as possible," a Merck spokesman said. "Once this process has been concluded, we will provide further information."

The German group's tender offer is the first major hostile bid by a German company for a U.S. target since BASF's 2006 approach for catalytic converter maker Engelhard, which ended up an agreed deal.

The moves by Merck and Entegris are viewed by some analysts as an effort to seize on beaten down stock prices in the volatile semiconductor industry after demand for mobile devices slowed and prices for memory chips sank.

Entegris is a producer of materials and systems for semiconductor fabrication.

(Reporting by Ludwig Burger in Frankfurt, Sanjana Shivdas and Tamara Mathias in Bengaluru; Editing by Mark Potter and Steve Orlofsky)