British Energy investor says talked with Centrica

LONDON, Sept 5 (Reuters) - British Energy BGY.L investor M&G has held "constructive" talks with British Gas-owner Centrica (CNA.L) about a possible deal for the nuclear operator, the fund manager told Reuters on Friday.

M&G, which owns 7 percent of British Energy, said a 12 billion pound ($21.10 billion) cash offer from France's EDF (EDF.PA) undervalues the company, and it would prefer to see a potential proposal from Centrica.

"We would prefer to have an opportunity to see a potential proposal from Centrica," a spokeswoman said, adding that no discussions had taken place with EDF.

EDF agreed a 765 pence a share cash offer for British Energy in July but the bid was rejected at the last minute by M&G and larger shareholder Invesco, which owns 15 percent of the firm.

Industry sources said on Friday EDF has made progress with takeover talks, but Invesco has said it also backs a merger between British Energy and Centrica, which proposed an all-share tie-up earlier this year.

The British government, which owns 35 percent of British Energy, favours EDF. (Reporting by John Bowker and Laurence Fletcher; Editing by Greg Mahlich)