UPDATE 2-Furniture Brands gets buyout interest; stock leaps

(Adds analyst comment, details)

NEW YORK, Feb 21 (Reuters) - Furniture Brands International Inc's (FBN.N: Quote, Profile, Research) third-largest shareholder, Sun Capital Securities Group LLC, said on Thursday it wanted to buy the company at a substantial premium, sending its shares up 27 percent.

Sun Capital, a private equity firm, sent a letter to Furniture Brands saying it was willing to acquire the maker of the Broyhill, Lane and Thomasville brands "at a substantial premium" to its Feb. 19 closing stock price of $10.18.

The equity firm, which disclosed its Feb. 20 letter in a regulatory filing on Thursday, said St. Louis-based Furniture Brands had lost market share and could best take steps to improve as a private company.

"Now that housing has encountered a severe downturn and the economy has weakened, we believe a more aggressive restructuring than what is being undertaken is needed to realize the potential of the company's brands," Sun Capital's letter stated.

John Hastings, a spokesman for Furniture Brands, said the company would issue a statement later on Thursday. Hastings did not indicate to Reuters what the statement would say, but added, "there's no firm price. They didn't make an offer."

The equity firm, which controls about 9.4 percent of Furniture Brands' stock, said it would not object to the furniture company evaluating other potential alternatives while working with Sun Capital on a transaction.

"Sun Capital has stakes in a number of companies in the furniture industry; we believe the firm has been awaiting the bottom in the industry cycle for some time," Morgan Keegan analyst Laura Champine said in a research note.

"The fund has remained a large shareholder since January of 2007 and watched its investment dwindle in value from the mid-teens," Champine's note added.