The biggest investor in Flagstar Bancorp in Troy, Mich., is reducing its stake below 50%.

The $17.7 billion-asset company disclosed that an affiliate of MatlinPatterson will sell 8 million shares in a secondary offering. The shares, priced at $34.50 each, represent a roughly 14% stake in Flagstar. MatlinPatterson could sell another 1.2 million shares if there is enough demand.

MatlinPatterson, which owns more than 60% of Flagstar, will have a 48% stake after the sales are completed, Scott Siefers, a Sandler O'Neill analyst, wrote in a note to clients.

MatlinPatterson invested $250 million in Flagstar in 2008 when the financial institution was struggling to survive.

Flagstar will not receive any proceeds from the sale.

Sandler and Keefe, Bruyette & Woods are the offering's underwriters.

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