UPDATE 4-Brit mulling $364 mln all-share offer for Chaucer

* Brit proposes 0.23 share for every Chaucer share

* Private equity firm Pamplona buys 7.34 percent stake

* Brit offer values Chaucer at 221 million pounds

* Chaucer recommends no action to shareholders

* Chaucer stock closes unchanged, Brit up 2.3 percent (Adds Pamplona stake buy, updates share price)

LONDON, June 22 (Reuters) - Lloyd's of London insurer Brit Insurance (BRE.L) proposed an all-share offer worth 221 million pounds ($364 million) for peer Chaucer (CHU.L), while a rival suitor said it had built a 7.34 percent stake.

Brit, currently in the process of shifting its tax base to the Netherlands from Britain, said it would offer 0.23 new share -- worth 40.25 pence based on Friday's close -- for each Chaucer share if it got a recommendation from the company's board.

Brit faces competition from private equity firm Pamplona Capital Management which said on Monday it had bought 40 million Chaucer shares at 44 pence following discussions with the board and other investors.

Chaucer, whose shares closed unchanged at 42 pence on Monday, said its shareholders should take no action whilst it discussed Brit's proposed offer with a number of them.

Pamplona said it had applied to the financial regulator, the FSA, to be allowed to hold over 10 percent of the company.

Pamplona, whose investment team includes former Resolution chief executive Paul Thompson, reiterated a statement made last month that it wanted a non-controlling interest of up to 29.9 percent in Chaucer. [ID:nLE112357],

A spokesperson for Brit said the company was aware of the filing to the stock exchange by Pamplona, adding: "The statement Brit announced this morning still stands".

Analysts said that at nearly a third below Chaucer's book value, the bid was unlikely to be popular with its shareholders and was further undermined by a positive trading update from the company on Monday.

"Shareholders can get better returns elsewhere in the sector," said analysts at Noble Research.

"This is unlikely to cut any ice with Chaucer shareholders who will receive no premium at all in exchange for a change in ownership, simply a stake in a 2.3 billion pound premium income entity," said Charles Coyne at FinnCap.

TRADING HIGHER

Chaucer said on Monday its January-May premium income was ahead of budget and it has benefited from an absence of major catastrophes compared to last year.

Chaucer, which suffered from hedge fund exposures last year, has forecast premium rates to increase by nearly 6 percent in 2009 for its underwriting portfolio.

Brit shares ended 2.4 percent higher at 179 pence. (Reporting by Lorraine Turner and Rosalba O'Brien; Editing by Hans Peters and Dan Lalor) ($1 = 0.6067 pound)