* Kirin to buyout Mercian in stock swap worth $127 mln
* Mercian under TSE scrutiny for inflating earnings
* Kirin says deal aimed at strengthening corp governance
* Mercian shares rally 6.8 pct, Kirin down 3.1 pct
(Updates with background)
TOKYO, Aug 27 (Reuters) - Japan's top beverage maker, Kirin Holdings, said it would acquire the shares it does not already own in Mercian Corp for about $127 million in stock to get a tighter grip on the scandal-hit wine maker.
Mercian announced in May that had it inflated profits over several years and booked a loss of 6.5 billion yen in August to account for false transactions, prompting a scolding from the Tokyo Stock Exchange.
Kirin revised down its annual net profit forecast by 27 percent earlier this month, partly to account for the loss at Mercian, which has been on a TSE watch list for possible delisting.
Kirin took a 50.1 percent stake in Mercian in 2006 as part of its efforts to diversify its earnings outside the sluggish domestic beer market.
Under the share swap deal announced on Friday, Kirin will deliver 9.34 million of its own shares. It will exchange 0.14 of its share for each one of Mercian, valuing the deal at about 10.7 billion yen ($127 million) at current share prices.
Shares of Kirin dropped 3.1 percent to 1,151 yen while the benchmark Nikkei 225 average fell 1 percent.
Mercian shares, which fell almost 12 percent since May 26 when it announced the improper trade transactions, rallied 6.8 percent to 158 yen. (Reporting by Mariko Katsumura; editing by Tim Kelly and Nathan Layne)