UPDATE 1 Gartmore lowers IPO price guidance - source

* Price range lowered to 220p-250p

* Investors balk at valuation

(Adds details)

By Chris Vellacott

LONDON, Dec 11 (Reuters) - Fund manager Gartmore has lowered price guidance on its initial public offer (IPO) and restructured the deal after investors balked at the valuation, a banking source close to the sale said on Friday.

The new price range is 220p to 250p, compared with the original guidance set at 250p to 330p while the targeted deal size reduces to around 340 million pounds ($553.9 million) from 400 million pounds, the source and a second fund manager source said.

The amount of new shares being issued will increase to maintain targeted proceeds for the company at around 280 million pounds, which Gartmore will use to pay off debt.

Because of the lower pricing, the sale by existing shareholders, Gartmore's management and staff and private equity group Hellman & Friedman, will be reduced.

"The quality of the deal was pretty poor and I think even with this new range it is still too expensive," said one head of UK equities at a large fund house.

(Reporting by Chris Vellacott, additional reporting by Raji Menon) (For the Hedge Hub blog: blogs.reuters.com/hedgehub) (For Global Investing: here)