LISBON - Brazilian civil construction conglomerate Camargo Correa is likely to withdraw its original proposal to merge its cement operations with Portuguese Cimpor on Friday, a Portuguese business newspaper reported.

Diario Economico cited sources close to the process as saying Camargo was nevertheless not giving up on Cimpor and was likely to challenge the Jan. 16 decision by Portugal's stock market regulator CMVM, which told Camargo to present a takeover counterbid. The regulator initially gave Camargo ten days to respond.

The paper said Camargo's chief executive Vitor Hallack was in Lisbon on Friday. Camargo officials were not immediately available for comment.

Cimpor is the target of a 5.75 euros a share takeover bid by Brazilian steel-maker CSN, which runs until Feb. 17 and values the Portuguese company at about 3.86 million euros ($5.42 million).

Camargo has proposed merging its cement operations into Cimpor and buying a 15 percent to 25 percent stake. It has already reiterated its interest in Cimpor following the regulator's rebuff.

Diario said Camargo has three options if it withdraws the merger proposal -- launch a counterbid that has to be at least 2 percent higher than CSN's, withdraw and wait for the end of CSN's original offer or negotiate a minority stake acquisition.

Also, Brazil's Votorantim conglomerate said on Tuesday it has made a conciliatory offer for a minority stake in Cimpor and was awaiting a decision from Cimpor shareholders on competing bids.

Cimpor shares were 0.25 percent lower at 6.085 euros in early trading, while the broader market in Lisbon was up 0.35 percent. ($1=.7122 euros) (Reporting by Andrei Khalip; Editing by Mike Nesbit)