UPDATE 1-PPR to unveil Fnac exit plans - source

* Plan could see spin-off or initial public offering

* Money-losing business long seen as tough sale

* PPR shares rise nearly 2 pct

(Adds background, analyst and trader comments)

PARIS, Oct 8 (Reuters) - PPR will announce itsplans for a possible stock market listing or spin-off of book,electronics and CD retailer Fnac following a presentation tostaff on Tuesday, a source familiar with the matter said onMonday.

The plan will then be put to shareholders for approval atnext year's annual general meeting, the source said.

"PPR's board is due to meet tomorrow on the plan to splitfrom Fnac before it's presented to the brand's workers," thesource told Reuters. "The exit plan is not completely decided,it could consist of a spin-off or stock market listing."

PPR is exiting its retail businesses to focus on its luxurybrands, including Gucci and Yves Saint Laurent, and sportslifestyle brands Puma and Volcom. It sold furniture retailerConforama last year and said last week it would update investorson plans to sell its Redcats mail order unit before Oct. 25.

Fnac, which has suffered as consumers turn to the Internet,saw recurring operating income drop 47 percent last year. Fnacswung to a loss of 7.5 million euros in the first half of thisyear while luxury profit rose 30 percent.

"Fnac has a good chance of attracting private equity orindustrial bids," a Paris-based trader said, citing a price ofaround 550 million euros ($718 million). "On the other hand, anIPO of Fnac would not be an easy thing to organize in thecurrent market mood."

The disposal of PPR's retail assets could boost the stock,depending on the price, as well as paving the way for luxuryacquisitions, the trader added.

Still, PPR has struggled to get bids for Redcats at thevaluation it wanted and bankers have long viewed Fnac as an eventougher sale.

"If you look at it in terms of electronics, they'redefinitely in trouble," said one Paris-based investment banker."Bookshops aren't in the best shape either."

Shares in PPR were up 1.7 percent higher at 123.75 euros by0733 GMT, the only gainers on a 1.4 percent weaker French CAC 40index for a rise of close to 12 percent this year.

Analysts at CM-CIC Securities put a value of 775 millioneuros on Fnac, or 6.1 euros a share, saying a spin-off was asuitable option given "the difficulty of selling this asset".

The analysts raised there price target for the stock to 150euros from 136 euros, adding it to their list of recommendedstocks with a "buy" rating.

PPR declined to comment.($1 = 0.7657 euros)

(Reporting by Pascale Denis, Additional reporting by ChristianPlumb and Blaise Robinson; Writing by James Regan; Editing byChristian Plumb)

((james.regan@thomsonreuters.com)(+33)(0)(1 49 49 5384)(Reuters Messaging:james.regan.thomsonreuters.com@reuters.net))

Keywords: PPR FNAC/