UPDATE 1-Primary extends Symbion bid, talks to Healthscope

(Adds deal talks and details)

SYDNEY, Jan 30 (Reuters) - Australia's Primary Health Care Ltd (PRY.AX) extended its A$2.7 billion ($2.4 billion) offer for Symbion Health Ltd SYB.AX by two weeks to Feb. 21, while it was talking to a former rival bidder about a possible compromise.

Primary and Healthscope Ltd (HSP.AX) began talks on the weekend, after a deadline barring the two from talking to each other ended on Jan. 26, two sources close to the deal said.

The sources declined to be named due to the sensitivity of the negotiations.

The extension gives Primary time to talk to Healthscope, which owns nearly 12 percent of Symbion, about carving up Symbion's pathology and diagnostic imaging businesses.

Healthscope and Primary have been engaged in a bitter battle over Symbion's assets since last year, after Primary used its stake in Symbion to block a proposed agreed takeover by Healthscope.

At stake is control of lucrative assets in an Australian healthcare sector set for rapid growth as the population ages and use of private health insurance increases.

Based on Symbion's latest share price, investors remain sceptical that any deal will go ahead, especially since Symbion's board has rejected the Primary bid.

Primary has been slow to win acceptances to its offer. After more than a month, it has conditional acceptances for 21.78 percent of Symbion in addition to its own 22.5 percent stake.

Healthscope's bargaining chip is its 11.9 percent stake in Symbion.

If it supports Primary, that will push Primary's control to more than 50 percent of Symbion, which would spur Primary to declare the offer unconditional, which in turn would attract more acceptances.

"Healthscope face the prospect that after all this time, effort and money spent they end up with nothing. I think they're prepared to use their 10 percent to say we can get you over the line," said Shaw Stockbroking analyst Brent Mitchell.

"Primary need to break the deadlock as well. They may want to bump the offer up 10 cents or so and give Symbion a chance to say: 'We've got a better price and recommend acceptance.'"

Symbion shares last traded up 1.9 percent at A$3.92, 4.4 percent below Primary's offer of A$4.10 a share.

Healthscope has had its eyes on Symbion's assets in the southern state of Victoria, which fit with Healthscope's private hospitals and pathology business.

The sources could not comment on what might emerge from the negotiations with Primary.

Primary shares fell 1.5 percent to A$10.88, while Healthscope shares were steady at A$5.18. ($1=A$1.12) (Reporting by Ben Wilson and Sonali Paul)