UPDATE 2-Magellan Midstream chosen as Longhorn bidder

* Magellan chosen as Longhorn's stalking horse bidder

* Purchase price is $250 mln plus $90 mln for product

* Magellan prices debt offering

* Magellan stock down slightly (Updates with debt offering, stock movement)

NEW YORK, June 19 (Reuters) - Magellan Midstream Partners LP (MMP.N) said on Friday it has been selected as the "stalking horse" bidder for substantially all the assets of Longhorn Partners Pipeline LP.

The purchase price for the 700-mile pipeline system is $250 million plus approximately $90 million for the fair market value of product currently in the pipeline.

Magellan said it intends to finance the acquisition with debt and completion is subject to an auction process, bankruptcy court approval and regulatory approval.

Later, the company said it priced a $300 million public offering of its 10-year senior notes at 6.55 percent. The net proceeds of approximately $296.5 million would be used to repay all borrowings outstanding under its revolving credit facility and for general partnership purposes, including capital expenditures.

Longhorn Partners Pipeline is a unit of Flying J, a privately held oil producer, refiner and pipeline operator that filed for Chapter 11 bankruptcy protection last December.

Magellan, which currently serves as the operator of the pipeline system, was chosen as the stalking horse bidder, meaning it makes the first bid from a pool of bidders. The system allows a distressed company to avoid low bids on its assets. Once the stalking horse has made its bid, other potential buyers may then submit competing bids.

The common carrier pipeline system transports refined petroleum products from Houston to El Paso, Texas. A terminal in El Paso, comprising a five-bay truck loading rack and more than 900,000 barrels of storage, is included in the purchase, Magellan said.

Magellan Midstream Partners stock was down 15 cents at $33.24 in afternoon trading on the New York Stock Exchange. (Reporting by Steve James; Editing by Steve Orlofsky and Tim Dobbyn)