Wrapping text around selection in emacs

I would like to wrap some text around the selected text in emacs.

From row selection:

First item
Second item

      

        
        
        
      

    

I would like to get:

\begin{itemize}
\item First item
\item Second item
\end{itemize}

      

        
        
        
      

    

Usage C-c C-e

in AucTeX collapses selection into one line:

\begin{itemize}
\item First item Second item
\end{itemize}

      

        
        
        
      

    

The following snippet in yasnippet:

# -*- mode: snippet -*-
# name : wrap item
# expand-env : ((yas-wrap-around-region nil) (item-string "\item  "))
# binding : C-M-z
# --
\begin{itemize}
`(let ((text (yas-selected-text))) (when text (replace-regexp-in-string "^" item-string text)))` $0
\end{itemize}

      

        
        
        
      

    

gives:

\begin{itemize}
item First item
item Second item
\end{itemize}

      

        
        
        
      

    

I tried using (item-string "\\item ")

this instead, but it gives an error:

[yas] elisp error: Invalid use of '\' in replacement text

I would like to be able to work with fragments, since I can modify it for use in other contexts.