UPDATE 1-Sweden's Kinnevik to exit investment in Millicom

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STOCKHOLM, June 4 (Reuters) - Investment company Kinnevik AB plans to divest its shareholding in telecommunications and media company Millicom International Cellular SA through a public offering and a distribution to Kinnevik’s shareholders.

Sweden’s Kinnevik will offer to divest 29% or about 11 million shares of the total 37.2% of Millicom shares it owns, and distribute the remainder of its holding to shareholders, the company said in a statement.

Kinnevik, founded by three wealthy families in 1936, is focused on digital businesses such as Swedish telecoms company Tele2 and online retailer Zalando.

Shares in Millicom, a cable and mobile operator in Latin America and Africa, traded 6.8 percent lower at 501 crowns at 0720 GMT.

The Kinnevik move comes after Millicom said in January talks about a possible offer for all shares of the company have been terminated by Liberty Latin America without an offer.

Sources said then that the talks broke up over Kinnevik’s demand for a complete deal, rather than the cash and share offer made by Liberty.

Kinnevik also said on Monday that it would revise its shareholder payout policy from next year. It will pay an annual dividend equivalent to ordinary dividends received from its portfolio companies while returning excess capital generated by investments to investors.

Its prior policy was to pay an annual dividend growing in line with dividends received from its companies, and the cash flow generated from investments.

Under Chief Executive Georgi Ganev, the firm has been pursuing a strategy of increasing its exposure to private Nordic companies as it battles for assets with larger hedge funds and private equity firms muscling in on its territory. (Reporting by Helena Soderpalm in Stockholm, additional reporting by Sabahatjahan Contractor in Bengaluru Editing by Keith Weir)