Cinven swoops on Old Mutual's Italian unit in $335 mln takeover - source

(Adds details on company break-up)

By Pamela Barbaglia

LONDON, Aug 1 (Reuters) - European private equity fund Cinven is about to start exclusive talks to buy the Italian wealth arm of financial services firm Old Mutual (Other OTC: ODMTY - news) for about 300 million euros ($335 million), a source with knowledge of the deal told Reuters.

The Anglo-South African group plans to wrap up the sale of its Milan-based subsidiary by the end of August, the source said.

Cinven has emerged as the final buyer for the company which was put up for sale earlier this year.

It trumped rival bids from U.S (Other OTC: UBGXF - news) . investment firms JC Flowers and Apollo as well as Lombard International Assurance, a Luxembourg-based insurer held by U.S. buyout fund Blackstone (NYSE: BX - news) .

Cinven, Blackstone and JC Flowers declined to comment. Old Mutual and Apollo were not immediately available for comment.

The deal is expected to pave the way for a series of divestments as the Anglo-South African group is working on a wider plan to break up its business, cut costs and revamp earnings.

On March 11, Old Mutual said it would split into four businesses: a South African bank, an emerging markets unit, a U.S. asset manager and a wealth manager in Britain.

Italy, which accounts for less than 5 percent of Old Mutual's overall wealth management activities, is the first chunk of that division to be spun out.

Financial advisory group Rothschild is leading the process. Private equity funds are vying for the business, which manages assets worth 6 billion euros.

Cinven, which was advised by Barclays (LSE: BARC.L - news) , has recently finalised insurance deals including the purchase of Ergo Italia, a subsidiary of German insurance company Ergo Group.

Other bidders were also keen to boost their presence in Italy. JC Flowers, which was advised by boutique advisory firm Equita, closed a deal last year to buy almost 80 percent of Eurovita Assicurazione.

Apollo, advised by UBS (LSE: 0QNR.L - news) , bought Carige Assicurazioni and Carige Vita Nuova from troubled Italian lender Carige last year, while Blackstone, advised by Mediobanca (Milan: MB.MI - news) , was looking to speed up growth at its portfolio business Lombard International Assurance.

In Italy Old Mutual specialises in unit-linked investment products which combine elements of insurance with investments in the stock market, so that the risk lies more with the customer than the insurer.

The group, which has been present in Italy since 1997, has a market value of 10.4 billion pounds ($13.7 billion) and has roughly 320 billion pounds of assets under management globally.

It has said its break-up plan would be complete by the end of 2018 and recently appointed an executive, Rob Leith, to manage the split.

($1 = 0.7577 pounds) (Reporting by Pamela Barbaglia; Editing by Rachel Armstrong (LSE: 32414833.L - news) /Ruth Pitchford)