UPDATE 3-Mill Road trumps Cosmos on Cossette bid; shrs soar

* Cossette spurns C$5.25 a share bid from Cosmos Capital

* Says Mill Road offer worth C$7.87 a share in cash

* Cossette shares surge 33 percent to C$7.78 on TSX (Adds analyst comments, updates share price move)

By Euan Rocha

TORONTO, Nov 10 (Reuters) - Cossette Inc (KOS.TO), Canada's largest homegrown advertising agency, said on Tuesday it will sell itself to private equity firm Mill Road Capital, spurning a lower bid from Cosmos Capital and sending its shares up 33 percent.

Mill Road will acquire all of Cossette's issued and outstanding subordinate voting shares for C$7.87 each in cash -- a 50 percent premium to Cosmos Capital's current offer.

Following a conversion of its multiple voting shares to subordinate voting shares in October, Cossette shares outstanding rose to 16.7 million, from about 12.4 million. Based on the new share structure the Mill Road offer would be worth about C$131.5 million ($125.2 million).

Cossette shares were up C$1.93 at C$7.78 on the Toronto Stock Exchange on Tuesday afternoon.

Cossette said the Mill Road deal is not conditional on financing or due diligence.