UPDATE 1-Nordstrom rejects initial take-private offer by family group

(Adds background info on family, share movement)

March 5 (Reuters) - Nordstrom Inc said on Monday it had rejected an indicative offer from the founding family group to take the upscale retailer private, sending its shares down 3 percent in extended trading.

The group's offer of $50 per share was below the stock's $51.90 close on Monday.

A special committee at the retailer said the proposed price was inadequate and that it plans to terminate discussions unless the price offered was "substantially" improved.

On Monday, Nordstrom said the family members suggested buying out shares that they did not already own, as well as 21 percent of the shares owned by the family group itself. The family currently owns 31 percent of the storied retailer.

Sources told Reuters in February that the founding family group had met with investment banks and was hoping to submit an offer as early as in March.

Nordstrom is being advised by Centerview Partners LLC as financial adviser and Sidley Austin LLP as legal counsel. (Reporting by Uday Sampath in Bengaluru; Editing by Shounak Dasgupta)