* Funds extend offer to April 30
* Retain right to pull out
* Funds' bid challenges rival offer backed by creditors
MILAN, March 22 Italian private equity funds Palladio and Sator said on Thursday they were extending to April 30 the deadline for their offer to rescue insurance group Fondiaria-SAI, to give more time for their proposal to be assessed.
Palladio and Sator, whose offer was scheduled to expire on March 22, are challenging a rival plan by insurer Unipol for a four-way merger with Fondiaria, its parent, Premafin, and its smaller unit, Milano Assicurazioni .
The Unipol merger plan, backed by Fondiaria group's main creditors, Mediobanca and UniCredit, calls for a 1.1 billion euro capital increase at Fondiaria and another cash call for the same amount at Unipol.
The funds' offer envisages a 450 million euro capital increase at Premafin but no merger with Fondiaria-SAI.
The funds said in a statement that they were extending the deadline for their offer to give Premafin "a significant amount of time to evaluate the industrial plan" they presented this week. They said they could pull out of the offer with a notice of two business days in case of events that they deemed "hostile" to their bid.
Premafin is controlled by the Ligresti family, under whose management Fondiaria's market value has withered to about 543 million euros from 5 billion just five years ago.
Premafin has said it is unable to consider the bid from Palladio and Sator, which together own 8 percent of Fondiaria, because its hands are tied by the exclusive agreement it has with Unipol and the position of its creditor banks.
The business plan of Palladio and Sator for Fondiaria sees the insurer posting a net profit in 2015 of more than 420 million euros, assuming a merger with unit Milano Assicurazioni. That compares with a loss of 853 million euros in 2011.
A takeover of Fondiaria by Unipol, Italy's No. 3 insurer by premiums, would create a company with 32 percent of Italy's non-life insurance sector and 37 percent of its motor insurance business, able to compete with larger rival Generali.
(Reporting By Silvia Aloisi; Editing by Steve Olofsky)