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* LiveMarkets: cpurl://apps.cp./cms/?pageId=livemarkets
* European stocks rise, Italy outperforms
* M&A chugs along, Lloyds rises after credit card deal
* Mediaset surges on Vivendi plans to raise stake
* Deutsche Boerse, LSE in talks with Euronext on LCH.Clearnet
* Actelion falls as UBS questions possible Sanofi takeover
By Vikram Subhedar and Danilo Masoni
LONDON/MILAN, Dec 20 (Reuters) - European shares rose slightly on Tuesday, holding near their highest levels since January, helped by a busy year-end for corporate deal making and more signs that Italy is making progress on stabilising its wobbly banking sector.
Europe's STOXX 600 rose 0.5 percent to its highest since Jan. 4 with financials providing the biggest boost to the index. Among national benchmarks, Italy's FTSE MIB was the best performer, up 1.5 percent to its highest since end January.
A recovery in corporate mergers and acquisitions activity helped underpin the ongoing year-end rally, with Mediaset surging another 23 percent in heavy volumes on Vivendi plans to raise its stake in the Italian broadcaster to 30 percent.
Mediaset, which saw more than 10 percent of its capital traded on Tuesday, has doubled in share price value since late November and is now positive on the year.
Corporate deal making, which had a record year in 2015, suffered earlier this year from uncertainty surrounding Britain's vote to exit the European Union, the U.S. presidential elections and Italy's efforts to stabilise its banking system.
"It could be that a lot of firms worried about Brexit and Trump earlier this year have realised that nothing has really changed yet, markets are up and want to get deals done," said Artur Baluszynski, head of research at investment firm Henderson Rowe.
Elsewhere, Lloyds Banking Group rose 2.2 percent after saying it would buy MBNA from Bank of America for $2.4 billion, a move that would make the British lender the second-biggest credit card provider in the country.
Euronext shares rose 2.5 percent after Deutsche Boerse and London Stock Exchange said they were in talks to offload LCH.Clearnet to the pan-European exchange operator ahead of their planned merger.
Italy's banking index rose 2.3 percent after the government decided to seek parliamentary approval to borrow 20 billion euros to underwrite the stability of its banks, starting with a likely bail-out of No. 3 lender, Monte dei Paschi di Siena, as early as this week.
The materials sector, particularly metals mining shares, underperformed and some investors locked in profits following the stellar run this quarter and as concerns about China resurfaced.
Top STOXX loser was Actelion, which fell 5.6 percent after UBS questioned the rationale of a potential takeover of the Swiss drugmaker from French rival Sanofi while worries appeared to be growing that a deal may not be as close as reports suggested last week. Sanofi rose 1 percent.
Immofinanz fell 5.5 percent after it reported a first-half net loss due to difficult market conditions in Russia, which also prompted the Austrian property firm to postpone a merger decision with CA IMMO to 2018. (Reporting by Danilo Masoni; Editing by Alison Williams)