By Valentina Za and Alvise Armellini

MILAN (Reuters) -Elliott-backed Italian speciality lender Banca CF+ on Monday announced a takeover bid for rival Banca Sistema, saying the consolidation wave sweeping the sector made it imperative to build scale.

CF+ said it had struck an agreement with Gianluca Garbi, founder, CEO and leading shareholder of Banca Sistema, who had committed to tendering his 24.9% stake in the lender.

CF+ priced its cash-and-share offer at a discount to Sistema's closing price on Friday of 1.96 euros a share. Sistema shares plunged 10.8% on Monday, prompting an automatic trading halt.

Banca CF+ is offering 1.8 euros a share, of which 1.382 euros in cash and 0.418 euros in shares of Kruso Kapital, a Banca Sistema unit active in the pawn business.

Banca Sistema did not immediately respond to an emailed request for comment.

CF+ said in a statement it would merge into Banca Sistema if the offer succeeded, retaining the bourse listing.

A Milan-based trader said the offer had prompted investors to pocket gains on Banca Sistema shares, which were trading at a three-year high, as they could always reinvest in the company at a later stage.

Sistema specialises in financing firms by acquiring their claims towards the public system, a form of speciality credit known as factoring. It also provides retail credit secured against one fifth of a person's salary.

CF+ was born from Credito Fondiario, an Italian lender in which U.S. fund Elliott Management first invested back in 2015, raising its stake in 2018 as it built a debt recovery business during the boom years of Italy's bad loan market.

In 2022, it split the banking business, which became CF+, from the loan recovery operations. The latter, dubbed Gardant, last year merged with Fortress-backed bad loan manager doValue.

The public exchange offer is the latest in a number of M&A deals in Italy's banking sector in recent months.

"The Italian banking sector is going through a phase of consolidation. Even in the segment of specialized banks, there is a need for larger and more efficient operators," Banca CF+ CEO Iacopo De Francisco said in the statement.

"The integration of Banca CF+ with Banca Sistema allows us to combine skills, technologies and industrial vision to create a more solid and innovative operator, capable of growing in the chosen business segments," he said.

($1 = 0.8521 euros)

(Additional reporting by Giancarlo Navach in Milan. Editing by Emelia Sithole-Matarise and Mark Potter)