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UPDATE 1-Spain's ACS, Italy's Atlantia in talks over Abertis deal

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MADRID, March 8 (Reuters) - Spain's ACS and Italy's Atlantia are in talks over their competing bid for Abertis, the companies said on Thursday, after Spanish newspapers reported that they were considering breaking up the highway concessions company.

The Italian motorway and airport operator is competing against Hochtief, the German arm of ACS, in the race to buy Abertis.

Abertis shares fell 3.8 percent at the market open, while ACS led gains on the Spanish Ibex, rising 6.8 percent, Atlantia rose 3.4 percent and Hochtief rose 3.5 percent.

Financial newspaper Expansion reported on Thursday, without citing sources, that Atlantia and ACS had spent weeks in talks on how to break up Abertis between them and avoid an expensive bidding war.

The tussle effectively pits the Benetton family, which controls Atlantia, against Spanish businessman and Real Madrid president Florentino Perez, the leading investor in ACS.

"We see ACS moving away from a bidding war as generally positive, as it would increase uncertainty over the valuation and the risk of overpaying," Sabadell said in a note, adding that a number of details over a break-up deal would need to be clarified before a full evaluation could be made.

Breaking up Abertis has the support of Italy's Mediobanca , Spanish news website El Confidencial said, citing unnamed sources close to the talks. Expansion reported that Spain's Grupo Caixa was also involved in the talks.

Hochtief's cash and share offer values Abertis at around 18.6 billion euros ($23.1 billion) while Atlantia's offer values the Spanish group at around 16.5 billion euros.

Hochtief's bid still needs approval from Spain's market regulator. ($1 = 0.8061 euros) (Reporting by Paul Day Editing by Jose Elias Rodriguez and Adrian Croft)