Ancestry is focusing its discussions on Permira after it asked the private equity firm and its competitors - Hellman & Friedman LLC and TPG Capital LP - to improve on their offers, the people said. Talks with Permira could still fall apart and there is no certainty a deal will be reached, they added.

The price under negotiation could not be learned, but sources familiar with the matter had previously told Reuters that Ancestry was seeking more than $35 per share for a sale, valuing the company at over $1.5 billion.

Provo, Utah-based Ancestry, whose website helps users trace their family roots by scouring online records, declined to comment. Permira and TPG declined to comment while Hellman & Friedman did not immediately respond to a request for comment.

Ancestry received offers from the three private equity firms in August and none of the bidders met the company's price expectations at the time, sources familiar with the matter previously told Reuters.

Ancestry closed trading on Tuesday down 1.7 percent at $29.69.

Ancestry has about 2 million paid subscribers. The website said in July it had discovered that U.S. President Barack Obama is the eleventh great-grandson of John Punch, the first documented African enslaved for life in the American colonies.

Ancestry suffered a blow in May when U.S. network NBC decided not to renew the company's TV show for a fourth season. The company sponsored the U.S. version of the popular British series "Who Do You Think You Are?"

The show, built around tracing celebrities' family histories through Ancestry.com's databases, was a major driver of new subscriber additions for the company's website.

Spectrum Equity Investors LP first made a minority investment in Ancestry in 2003 and four years later partnered with management to purchase a majority interest. Spectrum's stake in Ancestry was 31 percent as of the end of June.

Frank Quattrone's Qatalyst Partners is advising on the process, the sources said. Qatalyst was not immediately available for comment.

(Reporting by Greg Roumeliotis and Soyoung Kim in New York; Editing by Gerald E. McCormick, Bernard Orr)

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