Corrected: BP approaches funds to fend off takeover bids: source

(Corrects in fourth paragraph to say a 122 million share holding, not a value of $122 million)

DUBAI - British oil company BP has approached sovereign wealth funds with a view to securing a strategic investor to fend off takeover bids while it deals with its massive U.S. oil spill, a senior UAE source said on Tuesday.

BP executives have held talks with a number of sovereign wealth funds (SWFs) including Abu Dhabi, Kuwait, Qatar and Singapore, the source told Reuters under condition of anonymity.

BP is seeking a strategic partner so it doesn't get taken over by other major oil companies such as Exxon and Total, the source said. It's BP that is approaching the sovereign wealth funds not the other way round. They are the ones in need of a partner.

The Government of Singapore Investment Corp (GIC), one of two sovereign wealth funds in the nation, already owns around 0.7 percent of BP via a 122 million share holding, according to Thomson Reuters data.

GIC was not available for comment. Temasek, another Singaporean state fund, declined to comment.

It's normal sovereign funds are looking into it. Most of them are probably not going to buy on the market, said a Middle East based investment banker familiar with the matter.

They would consider a PIPE investment . BP has 2 choices, either sell assets or raise capital and this is under discussion, he added.

The size of any stake sale would be at least $500 million, the banker said.

Another banking source familiar with the matter said talks were still preliminary and that BP had yet to offer blocks of shares to SWFs.

For BP, it would be important not to undercut existing shareholders by offering a special deal to SWFs, bankers said.

BP had started marketing programs to convince funds that its share price is low enough to encourage them to buy on the market, he said.

If they get a special price they would invest, he said. But if they do and it's not the same deal as for existing shareholders, it would be a PR nightmare for BP.

Existing shareholders on Monday balked at reports that BP was looking to sell a stake, questioning whether it really needed a strategic partner.

Libya and China were also among those interested, the second source said.

BP shares have lost more than half their market value since the spill in the Gulf of Mexico was unleashed on April 20, the result of an explosion on a drilling rig that caused the undersea well to rupture.

Attempts to stop the flow have not worked, with BP pinning hopes on a relief well that should be completed in August.

BP has said it hopes to raise $10 billion from asset sales this year as part of its plan to fund a $20 billion clean-up fund set up under pressure from U.S. authorities.

Several newspapers reported interest this week among SWFs in buying some of BP's assets in the Middle East and Asia.

Britain's Sunday Times said BP's advisers were trying to drum up interest among rival oil groups and sovereign wealth funds to take a stake of between 5 and 10 percent in the company at a cost of up to 6 billion pounds ($9.1 billion).

(Additional reporting by Nicolas Parasie in Dubai and Saeed Hasan in Singapore; Editing by Simon Webb and Andrew Callus)