UPDATE 1-Webuild and Astaldi expect merger, debt spin-off completed by July

(Adds more details, share movements and analyst comment)

MILAN, March 15 (Reuters) - Italy’s biggest construction group Webuild will acquire the remaining 34% of Astaldi to complete their merger by July and spin-off Astaldi’s debt into a separate unit by then, the two companies said on Monday.

Formerly known as Salini Impregilo, Webuild took control, with a 66% stake, of its troubled rival Astaldi in November, completing the first phase of a state-backed plan dubbed “Project Italy” to revive the country’s ailing construction industry.

Under the plan, Astaldi will be split into one company that will be integrated into Webuild, and another company that will hold debt and assets that will be put into a foundation for creditors to recover the debt owed.

For the merger Astaldi shareholders will receive 203 Webuild shares for every 1,000 shares owned, the companies said in their statements.

The boards of the two groups will approve the plan on March 19, which will then be voted by shareholders in April, they said. Astaldi will be delisted from Milan’s stock exchange.

By 1130 GMT shares in Webuild were up 7.8% at 1.78 euros while Astaldi shares were the top loser on Milan’s all-share index, down over 14% at 0.36 euros.

“Compared to the two stocks’ current market prices, the exchange ratio favours Webuild, so we expect today a positive reaction for Webuild and a negative one for Astaldi’s stock price,” Bestinver Securities said in its daily research.

The broker said the deal was “positive news for Webuild” as it maximised synergies between the two groups and eliminated the conflict of interest with Astaldi’s minority shareholder.

The groups said that the merger would bring “significant operating, financial and economic benefits for the combined group”.

“The merger will grant current Astaldi shareholders access to a more liquid market for their shares and benefit directly from the growth of Webuild’s integrated activities,” they said.

In order to calculate the exchange ratio of the spin-off, Astaldi approved a 2021-2023 stand-alone business plan which sees revenues of 2.1 billion euros ($2.50 billion) and a core profit margin of 8.1% at the end of the three-year period.

$1 = 0.8386 euros Reporting by Cristina Carlevaro, editing by Giulia Segreti and Susan Fenton