UPDATE 4-Janus replaces CEO Black after sale talks

* CEO Black replaced by Tim Armour on interim basis

* Profit from continuing operations drops 76 pct

* Selling $150 mln stock, $150 mln convertible notes

* Janus approached on mergers, could not agree -- source

* Shares fall 9.2 pct to $10.14 after hours (Recasts, adds details about merger talks)

By Jonathan Stempel and Paritosh Bansal

NEW YORK, July 14 (Reuters) - Janus Capital Group Inc (JNS.N) abruptly replaced Chief Executive Gary Black on Tuesday, following what sources said were talks in recent months for a sale of the mutual fund company.

Black, who joined Janus from Goldman Sachs Asset Management in 2004 and became chief executive in January 2006, stepped down after he and Janus' board of directors "mutually agreed" on his departure, Janus Chairman Steve Scheid said on a conference call.

Scheid called the circumstances of Black's departure "very amicable," but repeatedly declined to elaborate. Tim Armour, 60, a Janus director and former president of Stein Roe Farnham's mutual fund unit, was named interim chief executive.

Separately, two sources familiar with the situation said Janus talked with multiple parties about a takeover in the past several months.

But Janus' stock is trading at a rich valuation -- some 30 times its estimated 2009 earnings -- which made it hard to do a deal that would add to the buyer's earnings, one source said.

The interested parties included private equity firms and insurance companies, the second source said.

However, the sources did not know if the takeover talks were behind Black's departure. They did not want to be identified because the talks were private.

Scheid said he was "very, very confident" about Janus' ability to stay independent, but will consider alternatives, "if scale is the only way to win."

The company set plans on Tuesday to sell $150 million of common stock and $150 million of five-year convertible notes and use the proceeds plus cash to buy back up to $400 million of debt.

One source said the capital raise was a sign the company was preparing to stay independent.