Old Mutual may raise up to $268 million from sale of stake in U.S. fund arm

LONDON (Reuters) - Insurance company Old Mutual (OML.L) said on Wednesday it had scaled up its sale of a stake in its U.S. asset management arm due to strong investor demand and total proceeds could now hit $268 million (170 million pounds).

The initial plan to sell 11 million shares in a secondary offering was announced on Monday, but on Wednesday, Old Mutual said it would sell an initial 13.3 million shares, and could increase this by nearly 2 million shares.

The sale would provide the parent company with greater financial flexibility and improve liquidity in the U.S. business, Old Mutual Asset Management (OMAM) (OMAM.N), an Old Mutual spokesman said.

Following the sale, Old Mutual's stake in OMAM will fall from 78 percent to at least 67 percent, and potentially 65.7 percent, the spokesman said.

Old Mutual listed Old Mutual Asset Management in the United States in October 2014 at a price of $14 a share.

OMAM's stock closed late Tuesday at $17.91 a share, down 0.5 percent. The company said assets under management were up 10 percent year on year to $224 billion at the end of March.

Bank of America Merrill Lynch (BAC.N), Morgan Stanley (MS.N), Citigroup (C.N) and Credit Suisse (CSGN.VX) are joint bookrunners for the deal.

(Reporting by Simon Jessop. Editing by Jane Merriman)