* Top shareholder halved holding after 12 pct stake sale
* Bank planning 3-bln euro rights issue in May
* Fragmented ownership makes it takeover target-analysts
* Investors interested in assets in peripheral Europe
By Valentina Za and Stefano Bernabei
MILAN/ROME, March 19 Banca Monte dei Paschi di Siena is becoming a potential takeover target after its biggest shareholder halved its controlling stake in Italy's third-largest bank.
The cash-strapped Monte dei Paschi foundation has sold 15 percent of the bank, likely to more than one buyer, and will cut its holding further in a 3 billion euro ($4.2 billion) cash call needed to avert nationalisation.
Analysts at Italian broker Equita SIM on Wednesday said Monte dei Paschi's shareholder structure had become more fragmented as a result of the foundation's sale, which made the bank more attractive to would-be buyers.
"This increases the speculative appeal of Banca Monte dei Paschi which, after the capital increase, will become the easiest takeover target (among Italian banks)," they wrote in a note to clients.
Monte dei Paschi, the world's oldest bank, was bailed out by the state with 4.1 billion euros of aid last year after being hit by the sovereign debt crisis and a derivatives scandal.
The foundation, a politically connected body that until early 2012 owned nearly half of the bank, sold 12 percent of its holding on the market on Tuesday and other small chunks in recent days.
The sale enables the foundation to pay off debts of around 300 million euros ($417 million) and clears the way for the rights issue that the foundation had delayed until May while it found a buyer for its shares.
The head of the foundation, Antonella Mansi, told Reuters in an interview on Wednesday she did not know who had bought the bank's shares, but that it was probably more than one player.
Improving growth prospects in weaker euro zone countries have attracted cash from investors fleeing emerging economies this year, and Monte dei Paschi is seen as a cheap play on Italy's economic recovery - despite the challenges it faces.
It would also be easier to take over than rivals UniCredit and Intesa Sanpaolo, the country's top two banks, Equita analysts said.
UniCredit has a cap on voting rights, which acts as a deterrent to potential purchasers, while various banking foundations together control nearly 25 percent of Intesa Sanpaolo.
Monte dei Paschi, the country's third-largest bank by branches, removed a cap on voting rights last year.
Equita also said the bank is a more appealing target than Italy's cooperative banks where investors have only one vote each regardless of the size of their stake.
Monte dei Paschi has lost more than 9 billion euros in the last three years and will not pay a dividend until 2016.
The rights issue is part of a tough restructuring demanded by Europe and the bank still risks being nationalised if it cannot pay back the bulk of the state aid this year.
Still, Monte dei Paschi's stock has risen 37 percent in the last month, outperforming a 28 percent gain in Italy's banking sector and hitting the 24 euro cents a share at which the foundation values its stake.
The foundation gave no details about its share sales.
Italian media cited U.S. investment fund Blackrock, which this month became the top shareholder in UniCredit as a possible buyer. The world's largest money manager is also the second-biggest investor in Intesa Sanpaolo. U.S. funds JC Flowers and Och-Ziff were also cited.
A BlackRock representative in Italy declined to comment, as did Och-Ziff, which earlier this month denied media reports that the fund had bought an 8 percent stake. Reuters was unable to reach JC Flowers for comment.
Mansi said the foundation aimed to keep a small stake in the Tuscan bank and may even take part in the capital increase.
She said she was still looking for a partner for part of the foundation's remaining stake to help relaunch the bank.
Monte dei Paschi declined to comment.
($1 = 0.7188 Euros) (Editing by Erica Billingham)