* Talks between suitors signals end of bidding war
* Atlantia, ACS discussing breaking up company, Expansion says
* Abertis shares drop 3.7 pct; Atlantia, ACS rise (Adds background, details, investor quote)
MADRID/MILAN, March 8 (Reuters) - Spain's ACS and Italy's Atlantia are in talks over their competing bids for Spanish toll road company Abertis, the companies said on Thursday, signaling a multi-billion euro takeover war could be nearing an end.
Atlantia and ACS have spent weeks in talks on how to break up Abertis between them and avoid an expensive bidding war, financial newspaper Expansion reported, without citing sources.
The long-running battle for Abertis pits the Benetton family, which controls Italian motorway and airport operator Atlantia, against Spanish businessman and Real Madrid president Florentino Perez, the leading investor in ACS.
ACS is bidding through its German arm, Hochtief.
At the time of the bid, Hochtief's cash and share offer valued Abertis at around 18.6 billion euros ($23.1 billion) while Atlantia's offer valued the Spanish group at around 16.5 billion euros.
At Wednesday's closing prices, Hochtief's offer values Abertis at around 17.9 billion euros, taking into account a reduced offer with Abertis paying a dividend; while Atlantia's offer values Abertis at around 16.7 billion euros.
Atlantia and ACS, in separate statements to the Spanish market regulator, confirmed on Thursday the existence of preliminary talks, but said there was no agreement so far.
Abertis shares were trading 3.7 percent lower at 1015 GMT, while ACS led gains on the Spanish blue chip index, rising 7.4 percent. Atlantia rose 4.5 percent.
Investors and analysts reacted positively to the news, saying it was neither in Atlantia or ACS's interest for the price to escalate. Both companies are loading themselves with debt to make their bids.
"It's positive news since instead of a bidding war there will be a division of assets," said Stefano Fabiani, fund manager at Italy's Zenit, who does not own Atlantia shares. "It certainly reduces the financial burden, which will help Atlantia's share price," he added.
The Spanish market regulator is expected to clear Hochtief's offer in the coming days. Hochtief and Atlantia's bids will then run in parallel for one month during which both groups have the option to improve their proposals.
News of the talks between suitors made one investor wonder whether Hochtief would be obliged to retract its counter-bid, made in October to trump Atlantia's offer.
"What I want to know now is whether Hochtief will or can pull its offer," said one Milan-based fund manager. ($1 = 0.8070 euros) (Additional reporting by Francesca Landini in Milan; Writing by Sonya Dowsett Editing by Jose Elias Rodriguez and Adrian Croft)