* Germany's KfW says to place 5 pct in Deutsche Post
* Equals some 60 mln Deutsche Post shares
* Price to be about 950 mln eur
* Germany's stake in Deutsche Post to shrink to 25.5 percent
* Deutsche Post free float to rise to about 74.5 pct
FRANKFURT/LONDON, Sept 6 The German government is shrinking its holding in Deutsche Post to a quarter by selling a 5 percent stake in the former mail monopoly for about 950 million euros ($1.2 billion).
The country has targeted billions of euros of proceeds from privatisations this year as the government is keen to consolidate public finances amid the euro zone's sovereign debt crisis.
State development bank KfW, which holds the German government's stake in Deutsche Post, said on Thursday it was selling the 60 million shares to institutional investors in an accelerated bookbuilding process.
The sale did not come out of the blue. Germany's economy ministry said late last year it would examine the possibility of exiting its holdings in Deutsche Post and in former state monopoly Deutsche Telekom.
Three people familiar with the process told Reuters in June that KfW had approached investment banks about the sale of at least part of its stake in Deutsche Post.
KfW is taking advantage of a rally in the share price of the Bonn-based mail provider that has taken the stock to its highest level in almost four years and given the company a market value of 19 billion euros, according to Thomson Reuters data.
In the past three months alone, Deutsche Post shares have gained 22 percent.
"We thought this was a suitable moment for a placement," KfW said in a statement, promising not to divest more shares in Deutsche Post for 90 days in a so-called lock-up agreement
The stock would be sold for at least 15.70 euros a share and priced on Friday, said Bank of America Merrill Lynch , which is the bookrunner of the sale, while Rothschild advises KfW.
After the placement of the shares the company's free float will increase to around 74.5 percent from approximately 69.5 percent.
"We welcome any new shareholder as well as a broader basis of our shareholders," said a spokeswoman for Deutsche Post.
The placement comes as other transactions are still ongoing.
The privatisation of real estate companies TLG Immobilien and its subsidiary TLG Wohnen, valued at more than 1.7 billion euros, is targeted by the end of the year.
Germany also owns a 25 percent stake in the country's second-biggest bank, Commerzbank.