Direct Line IPO price set at 175 pence/share

LONDON, Oct 11 (Reuters) - Royal Bank of Scotland set a price of 175 pence per share for the stock market listing of insurer Direct Line, close to the middle of the range originally set and valuing the business at 2.6 billion pounds ($4.2 billion).

RBS said on Thursday it would sell 450 million Direct Line shares, representing 30 percent of the business. It will raise 787 million pounds from the sale.

Trading in the shares on the London Stock Exchange will begin at 0700GMT on Thursday.

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)

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