* IPO planned for H1 2014, subject to market conditions
* Russia is Metro's most profitable business, No.3 market
* IPO expected to raise at least 1 bln euros
* Metro keen to invest proceeds in growth, cut debt
* Russian consumer spending buoyant despite slowing economy
BERLIN, Jan 20 (Reuters) - German retailer Metro AG plans to sell up to a quarter of its Russian cash-and-carry unit in a London listing in coming months to raise funds to invest in the fast-growing business and pay down debt.
Metro said its supervisory board had given its approval last Friday for the company to prepare for an initial public offering in London in the first half of the year, which it said was subject to market conditions.
The sale is expected to raise at least 1 billion euros ($1.36 billion)for Metro, with analysts valuing the total Russian business at 4-7.5 billion euros.
"We expect a listing to enable us to expand our business in an even more dynamic way and to strengthen the balance sheet of Metro Group at the same time," Chief Executive Olaf Koch said in a statement on Monday.
Besides helping the Russian business grow, Metro Chairman Franz Markus Haniel said the transaction should also give the company flexibility for other investments and help cut debt, which stood at 5.4 billion euros at the end of September.
"Metro's relatively geared balance sheet has been a consistent impediment to its operational turnaround. We are minded to be supportive of almost any move management make to de-lever the business," Citi analysts wrote in a note.
Metro, Europe's fourth-biggest retailer, has been restructuring to focus on cash and carry and consumer electronics, which it feels have better growth prospects than the supermarkets and department stores it wants to offload.
OWNER HANIEL DENIES BREAK-UP PLANS
Metro's shares, which jumped in November when Reuters first reported the company was considering a Russian IPO, rose as much as 2.7 percent on the news on Monday but later reversed those gains to trade down 0.2 percent by 1234 GMT.
Analysts speculate that a Russian IPO might signal that the company is open to more radical moves, although family-owned conglomerate Haniel, which has a 30 percent stake in Metro, denied a recent report that it was considering pushing for a full breakup of the sprawling group.
Metro has more than 700 cash and carries in 29 countries and the business accounts for almost half of group sales.
It entered Russia in 2001, with the country becoming its most profitable unit and Metro's third-biggest market for its cash and carry business, behind Germany and France, with sales of 4.1 billion euros in 2012. Consumer spending is still buoyant in Russia even as growth slows in the $2 trillion economy.
Metro is Russia's fourth biggest retailer behind X5 , Magnit and French chain Auchan. Its local rivals include Lenta, which is controlled by state bank VTB and private equity fund TPG, and is also planning to float on the stock market.
The Metro listing is likely to be run by Sberbank and Goldman Sachs, sources have told Reuters.