UPDATE 2-Kona Grill shareholder offers to take company private

* Mill Road offers 100 pct premium for Kona Grill

* Mill Road says does not need external financing

* Says Kona does not have capital to resume growth

* Kona shares up as much as 90 pct

(Adds background, updates share movement)

May 18 (Reuters) - Kona Grill Inc (KONA.O: Quote, Profile, Research) shareholder Mill Road Capital offered to buy the casual-dining restaurant chain for $27.9 million, or $4.60 per share, double the stock's closing Friday.

In a letter to the restaurant chain's board, Mill Road said its bid gave the company a better chance of "addressing competitive and capital issues as a private company".

The proposal -- coming a year after a similar $10.75 bid by Mill Road was rejected by the company -- sent Kona Grill's shares up as much as 90 percent in morning trade. They shed some of those gains to trade up 73 percent at $3.97 later in the session.

"Even with the current rights offering, the company does not have the capital required to resume growth at the end of 2009," Mill Road, which currently has a 9.8 percent stake in the company, said.