UPDATE 1-Stewart disappointed by SCI bid withdrawal

(Recasts; adds details and share movement)

Oct 8 (Reuters) - Funeral services company Stewart Enterprises Inc (STEI.O) said it was disappointed by rival Service Corp International's (SCI.N) abrupt withdrawal of its $1 billion buyout offer that sent Stewart's shares tumbling 28 percent in early trade on Wednesday.

In a letter to Service Corp, Stewart Chief Executive Thomas Crawford said the company would continue to assess alternative plans and was open to further talks with Service Corp.

In July, Stewart had rejected Service Corp's initial takeover offer of $9.50 a share. Service later sweetened its bid to $11 a share.

In an Oct. 7 letter to Stewart, Service Corp CEO Thomas Ryan said three pre-conditions demanded by Stewart were unacceptable.

He said Service Corp would not agree "to accept all financing risk of a transaction..., accept all regulatory risk on antitrust clearance and, in addition, increase its $11 a share proposal."

The withdrawal of the offer comes a week after Stewart hired Goldman Sachs & Co to weigh strategic alternatives after receiving the unsolicited takeover offer from Service Corp.

Shares of Stewart were down $1.97 at $5.12 in early trade on Nasdaq. Service Corp's shares rose 11 cents to $7.30 on the New York Stock Exchange.

(Reporting by Divya Nair in Bangalore; Editing by Anil D'Silva)