UPDATE 2-Australia's Lend Lease, Mirvac say held talks, shrs up

(Adds Mirvac statement, fund manager comments, updates shares)

By Sonali Paul

MELBOURNE, Dec 5 (Reuters) - Australian property investor Lend Lease Corp Ltd (LLC.AX: Quote, Profile, Research, Stock Buzz) has held talks with Mirvac Group (MGR.AX: Quote, Profile, Research, Stock Buzz) about a potential transaction between the two groups, both companies said on Wednesday.

Mirvac shares rose as much as 4.7 percent to a record A$6.18, giving the group a market capitalisation of A$6.4 billion ($5.6 billion), while Lend Lease shares rose 1.4 percent to A$19.57 in a weaker overall market.

Mirvac, which invests in, develops and manages hotels, retail and industrial properties, has been rumoured as a takeover target over the past two months. Its shares are up 12 percent since the beginning of October while Australia's listed property trust index has fallen 5.9 percent. A fund manager played down the likelihood of a deal going ahead, pointing to Mirvac's share price rally, its high earnings multiple relative to Lend Lease and tough conditions in the UK construction and residential markets, affecting Lend Lease.

"That would make it difficult to put a deal together," said Justin Blaess, director of property securities at ING Investment Management.

"I would put a higher certainty on it if there was screaming value there or a massive earnings arbitrage. At the moment, there's not," Blaess said.

He also said Mirvac shareholders would probably balk at being exposed to Lend Lease's Bovis construction business, just as shareholders in listed property trust GPT Group (GPT.AX: Quote, Profile, Research, Stock Buzz) did three years ago when they rejected a takeover by Lend Lease.

Mirvac is trading at around 19 times forecast earnings for 2008. Excluding profit from asset sales, it is trading on a multiple closer to 25 times, well above Lend Lease, which is trading at around 17 times forecast earnings.