* Industry min says wanted to preserve a French golden nugget
* Says France open to investment, but has to help recovery
* Orange still looking for investor to develop beyond Europe
By John Irish and Leila Abboud
PARIS, May 1 (Reuters) - France's industry minister said he had blocked Yahoo Inc's plan to buy a majority stake in online video website Dailymotion because the U.S. group wanted to "devour" its smaller competitor.
Yahoo, which declined to comment, had been in talks to acquire a 75 percent stake in Dailymotion, owned by France Telecom's Orange, a deal that would have valued Europe's largest video website at $300 million.
The failure of the talks makes for another public knock to France's business image after verbal attacks last year by Arnaud Montebourg on firms seeking to shut ailing industrial sites prompted international derision.
"I met the Yahoo and Orange chief executives in my office. Yahoo wants to devour Dailymotion, but we told them no and that it had to be a 50:50 split," Montebourg told Europe 1 radio.
France owns a 27 percent stake in France Telecom. French government officials had raised concerns that the country would lose control over one of its biggest Internet industry successes if the deal went ahead, sources familiar with the matter said.
Montebourg, one of the government's most outspoken ministers, is charged with restoring competitiveness to the industrial sector and promoting the "Made in France" brand.
He said that he had wanted Yahoo to follow a model similar to Renault and Nissan, whereby the identities of both firms were retained while they developed their products across the world.
"It's in the interest of France and Dailymotion, which is a golden nugget that needs to be preserved," he said.
President Francois Hollande, whose approval rating has fallen as low as 25 percent, is scrambling to beef up state coffers and kick-start investment and spending as his growth, deficit and job creation goals fall apart.
Montebourg said in an earlier statement he was committed to attracting foreign investment especially from American firms - the biggest investors in France, but that the "investments had to contribute to the recovery of the country."
A deal with Dailymotion and a non-European partner would have had little impact on employment in France since Dailymotion operates with only about 165 employees.
A spokesman for Orange, part of France Telecom, said discussions were ongoing with several potential investors as Dailymotion needed to find a partner outside Europe to accelerate its development.
Dailymotion is the 12th biggest video-sharing website in the world, according to web tracking firm comScore, trailing Google Inc's YouTube, but with a leading position in Europe.
It gets roughly 120 million unique users per month, more than any other French web company. Last year it broke even and generated 40 million euros in sales. France Telecom has been searching for a partner to boost the site's development outside Europe, especially in the United States.
Dailymotion, founded in 2005 by two young entrepreneurs has received roughly $68 million in venture capital backing and was bought by France Telecom in 2011.
Online video, which commands higher ad rates than traditional Web content, is increasingly important to Yahoo as it seeks to reverse declines in revenue and visitor traffic.
Yahoo Chief Executive Marissa Mayer, who took the reins of the struggling Internet pioneer in July, has so far focused her acquisition efforts on small, mobile start-up companies.