UPDATE 3-Penn National in Fontainebleau Las Vegas talks-source

* Fontainebleau in talks with at least 2 potential buyers (Adds background, Apollo Management comment)

By Deena Beasley

NEW YORK, Sept 18 (Reuters) - Penn National Gaming Inc (PENN.O) is one of at least two companies in talks to buy the bankrupt, unfinished Fontainebleau Las Vegas casino and resort, a source familiar with the matter said on Friday.

The negotiations, like any bankruptcy sale, are complicated by the large number of constituencies with a stake in the process, and by the fact that the resort's retail mall component is not part of the bankruptcy filing, said the source, who was not authorized to speak on the record.

Penn spokesman Joe Jaffoni said the company does not comment on rumors or speculation.

Las Vegas newspapers have reported that Apollo Management [APOLO.UL], one of the two private equity firms that owns No. 1 casino operator Harrah's Entertainment Inc [HAMLEH.UL], has also expressed interest in taking on Fontainebleau Las Vegas.

Apollo spokesman Steven Anreder declined to comment.

Nearly $3 billion already has been spent on the 70-percent- completed resort, which sits toward the northern end of the Las Vegas Strip.

Analysts have estimated that any buyer would need to spend at least another $1.5 billion to open the resort, with a low return on investment expected for several years as Las Vegas recovers from the recession.

Strip projects such as CityCenter, a joint venture of MGM Mirage (MGM.N) and Dubai World, and Deutsche Bank AG's (DBKGn.DE) Cosmopolitan -- planned when there was no end in sight to the gambling boom -- start opening later this year, adding nearly 10,000 luxury hotel rooms to the gambling corridor's current supply.

"Penn would be acquiring a property that sits in a somewhat remote location and would be adding another 4,000 hotel rooms to an already saturated market," Stifel Nicolaus analyst Steven Wieczynski wrote in a research note.

But the deal would give the company a toehold in the gambling mecca of Las Vegas. Penn pocketed $1.5 billion last year after two private equity firms canceled a deal to acquire the Wyomissing, Pennsylvania-based casino and racetrack operator.

Penn, which has confirmed several times over the past year that it was shopping for a Las Vegas resort, operates gambling properties throughout the United States, but not in Atlantic City or Las Vegas.

The 3,800-room Fontainebleau filed for bankruptcy protection in June after lenders terminated commitments to provide nearly $800 million in construction funds.

That funding was in addition to more than $2 billion in debt and equity that Fontainebleau Las Vegas had borrowed and invested in the project.

"We ascribe a low likelihood to Penn's buying Fontainebleau or buying all of its equity for construction costs," JP Morgan analyst Joe Greff said in a research note on Friday.

Fontainebleau said on Monday in a bankruptcy court filing that it was negotiating with an unnamed party interested in acquiring Fontainebleau's debt.

Penn National's shares closed up 14 cents to $27.86. (Reporting by Deena Beasley and Ilaina Jonas; editing by Carol Bishopric and Andre Grenon)