Britain's FTSE steadies near 2-month low, Diageo surges

* FTSE 100 steady by midday trading

* Diageo (LSE: DGE.L - news) surges on reported possible bid interest

* Shire (Xetra: S7E.DE - news) dips on report of potential takeover of Actelion (Xetra: 936767 - news)

By Atul Prakash and Liisa Tuhkanen

LONDON, June 8 (Reuters) - Britain's top share index steadied on Monday, with gains in Diageo on a reported takeover interest offset by weaker firms like Shire that fell on another report saying it was considering a $18 billion takeover of Actelion.

Diageo, the world's largest producer of spirits, jumped 6.7 percent on reports Brazilian billionaire Jorge Paulo Lemann and his partners in private equity firm 3G Capital (Other OTC: CGHC - news) are considering a bid for the company.

"The industry has been a hot spot of M&A activity, with smaller brands being picked up by major names looking to boost their appeal in niche products, but this is a deal of a different order of magnitude," Chris Beauchamp, senior market analyst at IG (LSE: IGG.L - news) , said.

"Given the amount needed to actually succeed, this bid could either be a crowning glory for Mr Lemann or a moment of extreme hubris. At any rate, it has certainly allowed Diageo to move ahead of its rival SABMiller (Xetra: BRW1.DE - news) in performance terms for the year so far."

The blue-chip FTSE 100 index was down 0.04 percent at 6,801.05 points by 1105 GMT, after falling to a two-month low in the previous session. The index fell 2.6 percent last week, its biggest weekly drop so far this year, but is still up more than 3 percent so far this year.

Among the top fallers, Shire dropped 2 percent after a Sunday Times report suggesting the pharmaceutical company was considering a 12 billion pound ($18 billion) takeover of Actelion Ltd, Europe's biggest biotech firm. Actelion shares jumped 8.9 percent.

British grocers also slipped, with Morrisons down 1.4 percent after announcing price cuts on Monday. It had announced in March 2014 that it would allocate 1 billion pounds ($1.5 billion) towards lowering prices over three years.

Like rivals Tesco (Xetra: 852647 - news) , Wal-Mart's Asda and Sainsbury's, Morrisons is lowering prices in a bid to stem the flow of shoppers turning to discounters Aldi and Lidl.

Tesco shares were down 1.5 percent, while Sainsbury's fell 0.7 percent. (Reporting by Atul Prakash; Editing by Dominic Evans)