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UPDATE 2-Russian retailer Lenta sets price range for share sale

* Lenta market capitalisation implied at up to $5 bln

* Valuation below Magnit, above O'Key - analyst

* Sale comes as Russia's economy slows

MOSCOW, Feb 14 (Reuters) - Russian hypermarket chain Lenta, part-owned by U.S. private equity firm TPG, has set a price range for its planned London market debut, which implies a market valuation of up to $5 billion, the company said on Friday.

Lenta is the latest Russian consumer company to launch an stock market listing to cash in on the country's rising middle class and follows the successful flotation of telecoms firm Megafon in 2012.

But the sale comes as Russia's economy is flagging - growth slumped from an average seven percent a year to just over one percent last year.

The price range for Lenta's offering is set at between $9.5 and $11.5 per one global depositary receipt (GDR), Lenta said in a statement, confirming an earlier Reuters report, with five GDRs equalling one Lenta share. A roadshow for investors is to start on Friday and will run until Feb 27, after which the offer price is to be announced.

The indicative price range implies a market capitalisation of between $4.09 billion and $4.95 billion, with the sale of some 19 million shares or 22.1 percent of existing share capital, Lenta said.

Lenta has said TPG, which owns a 49.8 percent stake, will sell some of its shares, as will the European Bank for Reconstruction and Development, which holds 21.5 percent, and Russian bank VTB, which owns 11.7 percent.

Jan Dunning, Lenta chief executive, said in a statement the group was in a strong position to capture the significant growth potential in the fragmented and underpenetrated Russian food retail market.

VALUATION

Lenta competes with Russia's biggest food retailer Magnit , which is focused on capitalising on increasing disposable income in Russia's regions and has a market capitalisation of $23 billion, and smaller rival O'Key with a market value of around $3 billion.

Analysts at Bank of America Merrill Lynch said in a research note that the valuation implied a 2013 estimated price-earnings multiple of 18.4-22 times, a discount to Magnit but a premium to O'Key.

"The valuation reflects investors' attitudes and is set somewhere in between Magnit and O'Key," a banking source said.

Retailers have been reporting slower growth as Russia's economy has faltered. Russian economy is expected to grow at an average of 2.5 percent till 2030, the Economy Ministry has predicted, with growth slowing across all economy sectors.

O'Key predicted that its 2014 revenue growth would not exceed last year's while Magnit has said that its sales growth slowed in December as customers chose to buy cheaper products, while electronics chain M.video saw a weaker performance at regional stores.

Lenta will compete for investor attention with German retailer Metro AG, which plans to sell up to a quarter of its Russian cash-and-carry business in a London listing to raise funds to invest and to pay down debt.

Metro's listing, planned for the first half of the year, is expected to raise at least 1 billion euros ($1.4 billion) with analysts valuing the total Russian business at 4 billion-7.5 billion euros.

The banks advising on Lenta's IPO are JP Morgan Chase & Co , Credit Suisse, UBS, Deutsche Bank and VTB Capital.

TPG Capital is acting as a co-manager while Rothschild is acting as financial adviser to Lenta.