* Terra Firma, CPI place 12.5 percent stake at 19.50 eur/shr
* Terra Firma to transfer remaining shares to fund's owners
* Deutsche Annington shares down 6.7 percent (Recasts with Deutsche Annington likely to qualify for MDax)
FRANKFURT, May 20 Property firm Deutsche Annington is set to join Germany's mid-cap stock index after buyout company Terra Firma transfers shares held by an investment vehicle to the owners of that vehicle, according to index tracking experts.
"I think it is very likely that Deutsche Annington will move up to the MDax index in September," Klaus Stabel from brokerage ICF Kursmakler said on Tuesday.
Deutsche Annington is, however, unlikely to qualify for a fast entry into that index in June because trading volumes of its stock are not high enough, he added.
For fast entry, a company needs to be ranked among the top 40 groups by market capitalisation and liquidity in Germany, while for normal inclusion - as part of routine quarterly revisions - the criterion is to be among the top 60.
Terra Firma, led by British financier Guy Hands, late on Monday said the owners of an investment vehicle set up to hold shares in Deutsche Annington would be given the stock directly, boosting the amount of freely tradable shares in the German firm.
The holding company, called Terra Firma Deutsche Annington Fund (TFDA), previously held two-thirds of the property company.
The transaction will lift the real estate company's free float to around 90 percent and allow fund investors to take advantage of better stock market liquidity to realise returns, Terra Firma said.
Separately, Terra Firma and a co-investor sold a 12.5 percent stake in Deutsche Annington for 19.50 euros per share on the open market on Tuesday, sending the stock down 6.7 percent. At 1302 GMT, the shares traded at 19.95 euros and led the biggest decliners in Frankfurt's small-cap index.
The transfer of shares held by TFDA to the fund's owners will likely put further pressure on Deutsche Annington shares as some of TFDA's investors may sell as soon as a 90 day lock-up period expires, a Frankfurt-based trader said. (Reporting by Arno Schuetze and Christoph Steitz; Editing by Ludwig Burger, Philipp Halstrick and Mark Potter)