MILAN, Dec 6 (Reuters) - Italian bank Banco BPM

is preparing to hire Citigroup ( C/PN ) and Lazard ( LAZ ) to advise

over how to confront a takeover bid by rival UniCredit

which has thwarted its growth strategy, three people close to

the matter said.

Banco BPM, Citi and Lazard ( LAZ ) all declined to comment.

Banco BPM has rebuffed UniCredit's 10.1 billion euro ($10.7

billion) all-share offer, saying it undervalues the bank and

creates problems for its own takeover of Anima Holding

, Italy's biggest independent fund manager.

Citi and Lazard ( LAZ ) are already working with Banco BPM on the

1.6 billion euro Anima bid which BPM launched on Nov. 6 to boost

its fee revenue in the face of declining interest rates.

The three sources said the two advisers were also the

natural choice to advise on the best course of action in

relation to the UniCredit move, and the mandate would be

formally expanded.

Banco BPM owns 22.4% of Anima, which also partners with

Monte dei Paschi di Siena (MPS). Shortly after

unveiling the Anima bid, BPM bought 5% of MPS from the Italian

state, while Anima bought 3%.

Italy's Treasury has long seen a merger with BPM as the best

solution for MPS, sources with direct knowledge of the matter

have previously told Reuters.

Rome rescued the Tuscan bank in 2017 and must eventually

return it fully into private hands, because of European Union

rules on state aid.

UniCredit CEO Andrea Orcel said last month that his bank

could not afford to be sidelined as domestic consolidation

heated up.

UniCredit had already prepared a bid for Banco BPM in 2022

before shelving it at the eleventh hour, sources with direct

knowledge of the matter previously told Reuters.

Banco BPM is a natural target because of its large market

share in Milan's wealthy Lombardy region, where UniCredit is

traditionally weak despite being Italy's second biggest bank.

Following the initial rejection, Banco BPM's board will be

able to give shareholders its official stance on the current bid

only after UniCredit completes the lengthy regulatory process

that will lead to the publication of the prospectus.

Sshares in Banco BPM were flat at 7.484 euros each at 1552

GMT, well above the 6.657 euros at which UniCredit is offering

to buy out BPM investors based on the share swap ratio.

($1 = 0.9448 euros)