* Magnit made non-binding proposal worth $3.65 per Lenta GDR
* But TPG and EBRD agreed to sell 42 pct in Lenta to Mordashov
* After buying stake, Mordashov launches offer for rest of Lenta
* Lenta's GDRs down 0.1 pct at $3.58 in London (Adds context, statement by Mordashov on mandatory offer launch)
MOSCOW, April 30 (Reuters) - Russia's second-biggest food retailer Magnit has dropped plans to bid for smaller rival Lenta, paving the way for Russian steel magnate Alexey Mordashov to seal a takeover valuing Lenta at about $1.75 billion.
Magnit this month made a non-binding, indicative proposal worth $1.78 billion to buy Lenta, Russia's third-largest grocery retailer, seeking to thwart Mordashov's plans.
However, when asked on Tuesday whether the company planned to pursue the acquisition, a Magnit official said it was not considering any major deals at the moment.
Magnit sent its proposal to Lenta on April 1, the same day U.S. private equity fund TPG and the European Bank for Reconstruction and Development (EBRD) agreed to sell their 42 percent stake in Lenta to Mordashov for $3.60 per global depository receipt (GDR). Magnit proposed $3.65 per GDR.
Mordashov, whose Severgroup includes Russian steel producer Severstal, received approval from the anti-monopoly regulator to buy the stake from TPG and the EBRD last week.
Severgroup has now completed the purchase and launched a mandatory tender offer to acquire the remaining shares in Lenta, also for $3.60 per GDR, it said in a statement on Tuesday.
"We are delighted to welcome Lenta into the Severgroup family," Mordashov said in the statement. Lenta, with a 3.2 percent share of the Russian food retail market, will add physical stores to Mordashov's Utkonos business, Russia's largest online grocery retailer.
"We want Lenta to maintain its public status after the mandatory tender offer closes...," he added. The offer is valid until May 21, but may be extended for 14 days if Mordashov secures a stake of more than 50 percent.
Lenta's GDRs were down 0.1 percent in London at $3.58.
Mordashov's offer implies a value of $1.75 billion for 100 percent of Lenta and an 8-percent premium to its GDR price as of March 26.
Analysts have been expecting Russia's food retail sector to consolidate amid tougher regulation and a decline in consumers' disposable incomes.
Mid-sized food retailer O'Key said in April that Russia's largest lender Sberbank had expressed an interest in its hypermarket business.
Russian second largest lender VTB, which has a stake in Magnit, has not ruled out selling a minority stake in Lenta to Mordashov, VTB was quoted as saying in April. (Reporting by Olga Popova; writing by Anton Kolodyazhnyy and Polina Devitt; Editing by Jason Neely and Mark Potter)