By Andrea Mandala and Giulia Segreti

MILAN/ROME (Reuters) -The discount to market prices represented by Monte dei Paschi's bid (MPS) for Mediobanca widened further on Monday, signalling deepening investor doubts over the bailed out Tuscan bank's offer for a bigger rival.

On Friday, the state-backed lender launched a surprise 13.3 billion euro all-share ($13.9 billion) buyout bid for Mediobanca, whose board meets on Tuesday to start reviewing the offer.

Based on Italian rules, the board will be able to give formal advice to shareholders only once the bid's prospectus is public, in a few months' time.

For now, the board is expected to give the cold shoulder to an unsolicited offer which values Mediobanca some 1.5 billion euros below its current market capitalisation.

In a letter to employees at the weekend, Mediobanca CEO Alberto Nagel said the offer had not been previously agreed and the bank would decide how to best protect the interests of its stakeholders.

Shares in MPS, which has returned to profits and dividends after a bailout in 2017, fell 1.6% by 1615 GMT, extending a 7% drop on Friday.

MPS is offering 23 of its own shares for every 10 Mediobanca shares tendered.

Mediobanca shares were up fractionally by 0.3% after Friday's 7.7% jump. Italy's banking index rose 0.3%.

MPS' proposed takeover, the latest move in a wave of consolidation in the Italian banking sector, was welcomed by Italy's conservative government but it has left analysts concerned about the limited scope for cost savings, and the ability to retain Mediobanca investment bankers.

"The deal was the least predictable among Italian banks given the different business models of the two banks," HSBC said in a note.

GOVERNMENT ENDORSEMENT

MPS CEO Luigi Lovaglio, a veteran banker for decades at UniCredit, has said the idea was to combine MPS' branch franchise with Mediobanca products, while preserving both brands and running Mediobanca's investment banking business separately.

Mediobanca's operations include wealth management and consumer finance. On the latter it already partners with MPS.

The government, which still owns 11.7% of MPS, has endorsed the offer and Prime Minister Giorgia Meloni on Sunday said everyone should be proud of MPS' turnaround.

"If the deal is successful, we will have that third major banking group [after Intesa Sanpaolo and UniCredit] which we always spoke about, a group that could help to protect Italians' savings," she said.

Meloni's government had been working on returning MPS to the private sector, after a previous collapsed sale of MPS to UniCredit in 2021.

After spurning MPS then, late last year UniCredit CEO Andrea Orcel derailed government's efforts to broker a tie-up of MPS and Banco BPM with support from billionaire Francesco Gaetano Caltagirone and the holding company of late fellow tycoon Leonardo Del Vecchio.

Caltagirone and the Del Vecchio family's Delfin holding are also leading shareholders in Mediobanca.($1 = 0.9551 euros)

(Writing by Valentina Za;Editing by Keith Weir)