Airbus raises $1.8 bln with sale of 17.5 Dassault Aviation stake

(Updates with completion of sale, price paid by institutions)

PARIS, March 25 (Reuters) - Airbus Group (Swiss: AIR.SW - news) sold a further 17.5 percent stake in business and fighter jet maker Dassault Aviation (Paris: FR0000121725 - news) on Wednesday as it unwinds its 16-year-old link to its defence market rival.

After the sale of around 1.61 million ordinary shares that raised 1.64 billion euros ($1.80 billion), Airbus' stake will drop to about 24.6 percent from 42 percent.

Airbus began cutting its stake in November and said at the time it would make its "best efforts" to sell more by the end of June through placements.

The initial disposal followed months of negotiations between Airbus, Dassault and the French government, on whose behalf Airbus holds its stake.

The holding arrangement has been considered outdated by its management, and some investors who have urged it to cash out.

Airbus announced the sale of a 15 percent holding initially on Wednesday, and then raised the amount to 17.5 percent later in the day.

Dassault Aviation bought a 460,000-share block of the stock amounting to 5 percent of its share capital at 980 euros per share, a 21 percent discount to Tuesday's closing price of 1,240 euros.

The institutional investors bought the remainder of what was offered, paying 1,030 euros per share, about a 17 percent discount.

Dassault Aviation shares were suspended on Wednesday.

The placement was accompanied by an over-allotment option of up to 120,000 shares, Airbus said.

Airbus said the proceeds would be used for "general corporate purposes".

BofA Merrill Lynch, Deutsche Bank (LSE: 0H7D.L - news) , Goldman Sachs (NYSE: GS-PB - news) and JPMorgan (LSE: JPIU.L - news) acted as joint bookrunners for the placement. ($1 = 0.9126 euros) (Reporting by James Regan; editing by Jason Neely, Keith Weir and Susan Thomas)