ATML Atmel Corp.

FRANKFURT—Activist hedge fund Elliott Management on Friday said it increased its stake in Dialog Semiconductor PLC and reiterated its opposition to the U.K.-based chip maker's planned $4.6 billion acquisition of U.S. peer Atmel Corp., in the hedge fund's latest move to try to derail the deal.

Elliott Associates LP and Elliott International LP now hold a combined 5% of the voting rights in Dialog, up from 3.6% Wednesday

Dialog needs at least 50% of shares to vote in favor of the Atmel takeover at a shareholder meeting on Thursday. "It is not too late to VOTE AGAINST the transaction, but do not delay and instruct the company or your custodian(s) … as soon as possible," Elliott said in a statement Friday.

The chances of Elliott derailing the transaction appear to be slimming, however. When the hedge fund on Monday revealed its position in Dialog and its opposition to the deal, Atmel shares fell to as low as $7.30, well below Dialog's offer of roughly $10.42.

But since then, some rival hedge funds and other investors said they are supportive of the deal, lifting Atmel's share price to currently $8.17.

Dialog and Atmel have been exchanging blows since Monday. Dialog said that Elliott had only a short-term interest and was trying to block the transaction, all the while down playing its potential. Some investors privately alleged that Elliott opposed the transaction only to make a profit on its short position on Atmel, which is a bet on falling share prices.

Elliott said it had short positions in Atmel and other semiconductor companies only to hedge its exposure to Dialog, but it didn't disclose the size of its positions.

Dialog, which was spun off from German luxury-car maker Daimler-Benz AG in 1999, said the deal will help the company reduce dependence on a few smartphone makers. At the same time, he said, acquiring Atmel's customer base and line of products will make Dialog a major player in chips for connected cars, wearable devices and other networked gadgets lumped under the catchall phrase Internet of Things.

Dialog sells chips used to manage power in high-end smartphones, including those made by Apple Inc. The company in September announced it reached an agreement to buy San Jose, Calif.-based Atmel. Atmel is best known for chips called microcontrollers that provide computing power for many kinds of consumer and business hardware.

Elliott said Wednesday it boosted its stake in Dialog to 3.6% from 2.9%.

Write to Eyk Henning at eyk.henning@wsj.com

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(END) Dow Jones Newswires

November 13, 2015 13:45 ET (18:45 GMT)

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