UPDATE 1-Marshall & Ilsey bank sells nearly $500 mln in stock

NEW YORK, June 11 (Reuters) - Marshall & Ilsley Corp (MI.N), which took $1.72 billion of federal bailout money, said on Thursday it raised nearly $500 million in a common stock offering.

The Milwaukee-based bank said net proceeds from the sale of 87 million shares at $5.75 a share was expected to be about $480 million.

The offering price was lower than the stock's $6.14 close on Thursday.

Marshall & Ilsley said it may use proceeds from the offering, subject to approval, to repurchase preferred stock issued to the U.S. Treasury.

The offering replaced a plan announced three weeks ago to sell $350 million of stock in an "at-the-market" offering.

The bank joins other lenders, including SunTrust Banks Inc (STI.N), that are selling stock quickly rather than over time to benefit from improved investor appetite for bank stocks.

Marshall & Ilsley shares have roughly doubled over the last three months.

The bank is one of the largest U.S. lenders not to have undergone government "stress tests" of its ability to handle a deep recession.

Morgan Stanley and Barclays Capital arranged the stock offering. Underwriters have the option to purchase up to an additional 13 million shares. (Reporting by Lilla Zuill; Editing by Dhara Ranasinghe)