UPDATE 2-Russia's Magnit triples buyback offer after strong foreign demand

(Adds details from Magnit statement throughout, JPMorgan details in last two paragraphs)

By Alexander Marrow

June 28 (Reuters) - Russian retailer Magnit on Wednesday said it would almost triple the number of blocked shares it buys back from foreign shareholders in response to strong demand from Western investors keen to exit Russian holdings.

The offer to buy back shares at a 50% discount is the first proposal of its kind by a Russian company since Western sanctions prompted by Moscow's invasion of Ukraine and subsequent Russian countermeasures deprived many foreign investors of the ability to trade in Russian securities.

More than 60% of Magnit's shares are free-float, with shareholders including major Western asset managers such as Blackrock, Pictet and Dodge & Cox, Refinitiv data shows.

Magnit said substantial interest from shareholders that significantly exceeded initial expectations had led to its increasing the offer to 29.8% of shares outstanding from 10% previously.

The company's Moscow-listed shares rose on an earlier Reuters report on the offer's widened scope and extended gains after Magnit's statement. The shares were last up 4.6%, outperforming the wider market.

Should Magnit's offer succeed, it could open the door for other companies to follow suit and allow Western investors to recoup more blocked funds, two sources with knowledge of Magnit's plans told Reuters.

"Finally, someone has given big and institutional investors an opportunity to exit assets in Russia, in which they have no prospects," one source said. "Everyone likes the fact that you can exit not only in roubles, but also in euros and dollars and to foreign accounts.

"So far, no one has offered this."

VOLUNTARY TENDER OFFER

Magnit first announced the tender offer in mid-June. Its wholly owned subsidiary Magnit Alyans now plans to buy 30,370,000 outstanding shares, up from 10,191,135.

Other terms and conditions remain unchanged, Magnit said. The price was set previously at 2,215 roubles ($25.76) per share. Magnit's shares were trading at 5,040 roubles per piece in Moscow on Wednesday.

Magnit has received approvals from the Russian government, which demands 50% discounts on asset sales involving foreigners, including the option for investors to receive funds in roubles, dollars, euros or yuan in bank accounts in Russia or abroad.

It is too early to gauge which currencies most investors are favouring, a second source told Reuters.

"Every investor evaluates risk differently, which currency is better or worse for them," the source said.

Crucially, the deal would enable investors to extricate funds from special "type-C" accounts, access to which is blocked unless Russia grants waivers.

"The deal is structured in as comfortable and friendly a way as possible for Western investors, especially considering the current environment," the second source said.

When first announcing the plans, Magnit said the tender offer was also addressed to JPMorgan Chase regarding shares held in the depositary bank's depositary receipt program custody account.

Investors holding Magnit's depositary receipts are seeking clarity from JPMorgan on whether they too might be able to participate in the tender offer, a third source with direct knowledge of the matter said. ($1 = 85.9955 roubles) (Reporting by Alexander Marrow; additional reporting by Sinead Cruise and Maria Kiselyova; editing by David Evans and Jason Neely)