(Refiled to remove editing note before headline)
* European Commission reviewing Inoxum acquisition
* Commission said sale of Swedish interests not sufficient
* Shares fall 6 pct
HELSINKI, Oct 1 Finnish stainless steel maker Outokumpu has offered to sell a prized Italian mill to win regulatory approval for its acquisition of ThyssenKrupp's Inoxum.
The offer, however, raised fears that the benefits of the 2.7 billion euro ($3.5 billion) Inoxum deal would be diluted, sending the Finnish company's shares down 6.4 per cent on Monday morning.
Outokumpu's new proposal is aimed at appeasing the European Commission, which deemed the previous plan to sell Swedish operations as insufficient.
The company said that instead of proposing a sale of its Swedish melting and coil operations, it is offering to sell a plant in Terni, Italy, which is considered one of the most advanced steel mills in Europe.
It now expects the Inoxum deal to yield annual cost savings of 200 million euros instead of the 225-250 million euros indicated after it announced the acquisition in January.
Analysts said they had expected the Terni mill, especially its melter, to play a key role in the new company.
"What will it do for future cost competitiveness if one of Europe's most efficient production units will have to be sold to a competitor?" asked FIM analyst Markus Liimatainen. "If Terni has to be sold, would it not make more sense to withdraw from the merger?"
The Inoxum deal was expected to create the world's top stainless steel producer and help the enlarged company to deal with overcapacity and price competition from Asia.
Outokumpu is currently the fourth-biggest stainless steel maker in Europe, where rivals include Acerinox and Aperam.
Outokumpu Chief Executive Mika Seitovirta said the deal was still worthwhile. "Strategic importance and our commitment to the Inoxum transaction remain unchanged despite the EU Commission's new demands," he said in a statement.
The Commission is due to rule on the acquisition by Nov. 16. ($1=0.7773 euros) (Reporting by Terhi Kinnunen; Editing by David Holmes and David Goodman)