* FTSE 100 flat; Shire biggest prop to index
* Whitbread rallies after strong update
* FTSE briefly extends gains after inflation data
* Ashtead sees post-results sell-off; traders remain bullish
By Tricia Wright
LONDON, June 17 (Reuters) - Bid speculation around drugmaker Shire and a strong update from Premier Inn-owner Whitbread kept Britain's blue-chip share index afloat on Tuesday, offsetting a steep fall in equipment rental firm Ashtead.
Shares in Shire jumped 2.8 percent, providing the biggest prop for the FTSE 100, after sources told Reuters the healthcare group has hired investment bank Citi as an adviser, expecting to receive takeover approaches.
"We've been buyers of Shire recently and on the back of this we'd look to add to positions," said Manoj Ladwa, the head of trading at TJM Partners.
Healthcare companies have seen a wave of merger and acquisition speculation in the past two months. Shire has been tipped as a possible target partly because of its tax base in Ireland, where effective corporate tax rates are among the lowest in the world. The stock has risen nearly 30 percent since mid-April.
"You've got at least a third of the value of any bid priced in, but I think you've still got a fair amount of upside potential even if you buy at this sort of level," TJM's Ladwa said.
He said the stock, now trading at around 36 pounds ($60.45) per share, could hit 50 pounds if a bid materialises.
The broader FTSE 100 was up 1.07 points - flat in percentage terms - at 6,755.71 points by 1052 GMT.
Also supporting the index was Whitbread, Britain's biggest hotel and coffee shop operator, which reported a robust start to the year, driven by particularly strong growth at its Premier Inn hotels. Its shares rose 3 percent.
The FTSE had fallen in three of the previous four sessions, pressured by geopolitical concerns ranging from violence in Iraq to tensions between Russia and Ukraine, as well as speculation that the Bank of England will tighten policy before year-end.
The FTSE 100 briefly extended its gains on Tuesday after British inflation fell more sharply than expected in May, giving the BoE some room to keep interest rates near record lows.
Ashtead shed 6 percent despite seeing a 50 percent rise in full-year pretax profit, beating its guidance, and expressing confidence a pick-up in U.S. and British construction would help deliver more growth in the next three to five years.
Traders remained bullish, seeing little reason for such a sharp pullback in the share price - which nonetheless has jumped some 40 percent in the last 12 months.
"The only thing I can highlight as slightly negative is the increase in net debt ... the move lower (in the shares) seems overdone," said Jordan Hiscott, senior trader at ayondo markets.
"In my opinion, Ashtead have produced an impressive set of figures with a positive position for future growth," he said, seeing scope for a move back up to 925 pence, some 11 percent from current levels.
BT Group proved the biggest drag on the FTSE 100 as concerns about a large increase in its pension deficit continued to weigh on the telecoms firm. Its shares dropped 1.7 percent. ($1 = 0.5956 British pounds) (Additional reporting by Francesco Canepa; Editing by Susan Fenton)