UPDATE 1-Italcementi shares up after merger abandoned

* Italcementi shares up 3.7 pct, Ciments Francais down 7 pct

* Share price moves seen caused by "short-covering"

* Italcementi faces funding gap - Exane

(Adds analysts' comments)

MILAN, June 29 (Reuters) - Shares in Italcementi (ITAI.MI), Italy's biggest cement maker, rose on Monday following news that it has abandoned its plan for a full takeover of Ciments Francais (CMFP.PA), but analysts attributed the rise to short covering and said the longer term implications were negative.

Italcementi, the world's fifth-largest cement group by production capacity, had been seeking to buy out the 18 percent of Ciments Francais it does not already own.

But Italcementi and its Paris-listed unit said in a statement on Saturday conditions for the proposed merger had not been met, blaming "excessive" requests made by a group of U.S. holders of bonds issued by Ciments Francais in 2002 and 2006 for a total of $500 million. [ID:nLJ884157]

At the end of March Ciments Francais had total net debt of around 1.7 billion euros ($2.4 billion).

"In the medium to longer term it is a pity that the group wasn't able to simplify its capital structure, take advantage of synergies and benefit from earnings and value enhancement," said MF Global analyst Tobias Woerner in a note.

"This is unfortunate and probably also leaves the group with a sour taste and unlikely to come back to this project in the near-term," he said.

The bond holders were asking for an increase in the notes' yield to nearly 9 percent from 4 percent in exchange for their approval of the merger, Italian business daily Il Sole 24 Ore said on Sunday without citing sources.

The newspaper said the bond contract allowed mergers but had a clause that gave note holders a say in intra-company deals.

On Saturday Italcementi's chief executive, Carlo Pesenti, had said that a divergence in interpretation of a clause in the bond contracts stopped the group going ahead with the merger.

He said proposals for settling the disagreement were not accepted by enough note-holders, adding that the group had decided not to go to litigation because this would have required too much time.

In a note Exane said the failure of the merger now left Italcementi with a funding gap, which "it will have to close either through refinancing, an increased dividend from Ciments Francais, or a capital increase."

Pesenti said on Saturday that the group still intended to streamline its organisation.

By 1109 GMT on Monday shares in Italcementi were up 3.7 percent at 8.17 euros, while Ciments Francais was down 7.1 percent at 59.72 euros.

If the merger went through the French company would have paid a one-off dividend.

"Some investors were long on Ciments Francais and short on Italcementi and now that the deal is over they have to close the position, a sort of short covering," a Milan-based analyst said. ($1=.7143 euros) (Reporting by Danilo Masoni; Editing by Greg Mahlich)