UPDATE 1-GOME talking with Dazhong after Suning pulls out

(Adds analysis, background, share prices)

By Samuel Shen

SHANGHAI, Dec 13 (Reuters) - GOME Electrical Appliances, China's top electronics retailer, said it was discussing a possible acquisition of Dazhong Electrical Appliances after arch-rival Suning Appliance Co abandoned a plan to buy Dazhong.

"We have always been in touch with Dazhong. There may be a result fairly soon," GOME (0493.HK: Quote, Profile, Research, Stock Buzz) president Chen Xiao told Reuters on Thursday, commenting on a report in the Shanghai Securities News that his company had bid for Dazhong.

He declined to elaborate. A spokesman for Dazhong could not be reached for comment.

Suning 002024.SZ, China's second biggest electronics retailer, said on Thursday it had abandoned its plan to buy Dazhong because the companies disagreed on key issues.

It did not elaborate on the reason for the collapse of acquisition talks, which began in April, but the Shanghai Securities News quoted unnamed sources as saying the reason was a higher bid by GOME.

Chinese media have reported Dazhong was asking a range of potential buyers for 3 billion yuan ($407 million).

Suning said it would now grow mainly by expanding its own outlets. Its shares plunged 8.86 percent to 62.30 yuan on the Shenzhen Stock Exchange by midday, while GOME's Hong Kong-listed shares sank nearly 3 percent in a weak overall market.