Direct Line IPO to be priced around middle of range

LONDON, Oct 10 (Reuters) - Royal Bank of Scotland will fix a price on Thursday for the stock market listing of insurer Direct Line at around the middle of the range originally set, market sources and a source close to the transaction told Reuters.

The initial public offering is expected to be priced at 175 pence per share, valuing the business at 2.6 billion pounds ($4.2 billion), sources said late on Wednesday. One source close to the transaction said the final figure had yet to be set.

RBS is selling Direct Line in return for winning approval from European Union regulators for a bailout by Britain during the 2008 financial crisis that left it 82 percent state-owned.

The price is at the midpoint of the 160-195 pence range set by the British bank when it launched the initial public offering (IPO) on Sept. 28.

RBS has been under pressure to secure a good price for the business, with British taxpayers currently sitting on a loss of 21.5 billion pounds after Britain pumped in 45 billion to rescue the bank.

($1 = 0.6242 British pounds)

(Reporting by Matt Scuffham; Editing by M.D. Golan)