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UPDATE 2-Spain's ACS studies Abertis counterbid to deny Italy's Atlantia

* ACS says no decision yet made on making a counterbid

* ACS's shares down 4 pct, Abertis's shares up 2 pct

* Analysts expect Atlantia to improve its offer (Adds share prices, comment, details)

MADRID, July 21 (Reuters) - Spanish construction group ACS said on Friday it was considering a counterbid for Spain's Abertis after a more than 16 billion euro offer by Italy's Atlantia for the toll road company.

Italian infrastructure firm Atlantia made a 16.50 euros ($19.21) per share offer for Abertis in May in an attempt to form the world's biggest toll road company.

Expansion newspaper reported on Friday that ACS had been working on its own offer for weeks and could use its German subsidiary Hochtief to launch the counterbid.

ACS said in a statement to Spain's market regulator that it had not yet made a decision about whether to bid for Abertis , which it was studying with external advisers.

Analysts said the most likely scenario now was for Atlantia to improve its offer price as its bid undervalued Abertis. ACS's counterbid made strategic sense, they said, as Abertis was a low-risk asset that would complement its own operations.

The market regulator is still looking at whether to approve Atlantia's bid, a process that usually takes two or three months, and the Spanish government can block the transaction if it does not meet Spain's strategic interests.

Atlantia said in a June prospectus that it could consider making a full cash offer for Abertis, as so far it has wanted at least 10 percent of Abertis's shareholders to accept shares.

News of ACS's possible bid sent its shares down around four percent to the bottom of Spain's blue-chip IBEX index. Atlantia's shares fell slightly, while Abertis's were up 2 percent.

A Hochtief spokesman declined to comment on Expansion's report and said it was a matter for ACS, which owns 72 percent of the firm. Hochtief shares were down 3.5 percent, the biggest faller on Germany's MDAX index of medium-sized companies. ($1 = 0.8576 euros) ($1 = 0.8588 euros) (Reporting by Robert Hetz and Jose Elías Rodríguez; Additional reporting by Matthias Inverardi in Frankfurt; Writing by Angus Berwick; Editing by David Clarke and Alexander Smith)