UPDATE 1-Italy's Atlantia extends talks on unit sale to March 27

MILAN, March 16 (Reuters) - Atlantia ATL.MI agreed to extend talks with a consortium led by state lender CDP over the sale of its 88% stake in motorway unit Autostrade per l'Italia to March 27, the Italian infrastructure group said on Tuesday.

CDP, together with co-investors Macquarie MQG.AX and Blackstone BX.N, and Atlantia have been negotiating on Autostrade since last year as part of an effort to end a dispute triggered by the 2018 collapse of a bridge ran by the unit.

Atlantia hopes for "substantial improvements" in the consortium's offer, the group said in a statement, adding that, if a compromise is reached, it may submit the new proposal to its shareholders.

Last month the consortium presented a binding proposal that values all of Autostrade at 9.1 billion euros but Atlantia's advisers have said the fair value of the business is at least 10.5 billion euros, three sources close to the matter have said.

The consortium also requested Atlantia guarantee up to 700 million euros in potential damage claims and another roughly 800 million euros for a pending legal case, making the bid less attractive. nL8N2KW337

Until now no concrete improvement of the proposal has been put forward, two sources with knowledge of the matter said, adding that room remained for negotiation.

The Benetton family, which controls Atlantia with a 30% stake, last week threw its weight behind extended talks with CDP, asking the group's chairman to negotiate to improve the offer, one source close to the matter said.

Minority investors, including hedge fund TCI, have instead asked the group to reject the consortium's offer, which they consider too low.

Tuesday marks a previous deadline for Atlantia to decide whether to accept or reject the binding offer presented by the consortium.

(Reporting by Andrea Mandalà, Francesca Landini and Stephen Jewkes; editing by Cristina Carlevaro and David Gregorio)

((andrea.mandala@thomsonreuters.com; +390680307738;))