TUI shares fall after shipping tycoon Fredriksen sells out

* Fredriksen sells 39.7 mln shares

* Aide says he found he had too little influence at TUI (Xetra: TUI1.DE - news)

* TUI shares have gained 48 pct over last six months

* TUI shares drop 5 percent, biggest MDax faller

FRANKFURT, Feb 20 (Reuters) - Shares in German travel group TUI AG dropped 5 percent on Thursday following the sale of a 15.7 percent stake by its second-largest shareholder, John Fredriksen, who had been pushing for a merger with London-listed TUI Travel (LSE: TT.L - news) .

The Norwegian-born shipping magnate sold 39.7 million ordinary shares via his Monteray investment vehicle in a market placing at 13.13 euros a share for a total of 521 million euros ($717 million).

The shares, which have gained 48 percent over the last six months, were down 5.5 percent at 13 euros by 1045 GMT.

Having clashed with TUI's previous chief executive Michael Frenzel, Fredriksen last year instigated talks with the aim of merging TUI AG with 54.5 percent-owned TUI Travel, Europe's largest tour operator.

His aide told Reuters that Fredriksen found he had too little influence at the group.

"Our investment in TUI AG was not the best investment we've done in the past. But with the share price recovery since Frenzel's departure we were now able to recover most of our money," Tor Olav Troim said. He declined to give a date for the planned sale of Fredriksen's remaining 4.4 percent.

TUI AG said it believed the move was consistent with Fredriksen's strategy of focusing on shipping over tourism, especially after Monteray also reduced its stake in TUI Travel in November.

Troim said Fredriksen had rejected a suggestion by TUI that he buy the group's 22 percent stake in shipper Hapag-Lloyd , in talks over a merger with Chilean shipper Vapores , also because he would have had too little say there.

Meanwhile TUI shareholder RIU, the Spanish hotels group, and three of TUI's top executives have increased their shareholdings in the company by buying some of Fredriksen's shares in the placing. RIU has raised its stake to around 8 percent from 6 percent, according to a document sent to employees by TUI AG management.

It was not clear if TUI's biggest shareholder, Russian billionaire Alexei Mordashov, has also increased his stake, which currently stands at 25.22 percent according to Thomson Reuters data.

TUI AG's chief executive Friedrich Joussen bought shares worth 500,000 euros in the placing, while Chief Financial Officer Horst Baier and Chairman Klaus Mangold bought 250,000 euros' worth apiece.

"We consider the new shareholder structure ... and the future high liquidity in the market as an opportunity for the further positive development of TUI AG and our group," Joussen said in the letter.

JP Morgan (Other OTC: JPYYL - news) analysts said the increase in the market free float to 66 percent from around 48 percent was positive as was the fact that the Riu family and managers were buying shares.

"We view this as addressing one of the key investor concerns regarding previous management," they wrote in a note.

The sale was made via an accelerated bookbuilding process managed by Goldman Sachs (NYSE: GS-PB - news) .