UPDATE 2-French bidders vye for Turkish airport group stake
* Vinci seen as front runner - sources
* ADP may be handicapped by France's majority stake - sources
* Final bids due early next week - sources
* French genocide role roils auction - sources (Adds additional comment, background)
By Christian Plumb and Gilles Guillaume
PARIS, Feb 29 (Reuters) - Two French companies have become the final bidders for a stake in Turkish airport operator TAV Havalimanlari Holding, an auction roiled by an international spat over the mass killing of Armenians nearly a century ago.
French construction group Vinci said on Wednesday it would bid in coming days for the stake, which sources have said would constitute up to 40 percent of TAV, as its two key stakeholders sell down their holdings.
Aeroports de Paris is the other finalist for the stake in the company, which operates 10 airports including Turkey's biggest, Istanbul Ataturk, as well as terminals in Tunisia, Macedonia and Georgia.
The deal was expected to value the entire company at more than $2 billion.
Two sources close to the deal told Reuters they saw Vinci as frontrunner, while a third said it was too early to choose a winner given that final bids were only due early next week.
ADP has been handicapped by the French government's majority stake in the operator at a time of Turkish ill-will toward France resulting from a new law that would make it illegal to deny the mass killing of Armenians by Ottoman Turks.
That law was struck down by France's Constitutional Council on Tuesday, but French President Nicolas Sarkozy asked his government to draft a new version.
"Vinci is expected to win the TAV deal. Vinci and ADP will place their bids in a few days' time," said one source close to the deal.
A third source close to the transaction, however, cautioned it was not a done deal, noting that ADP's bid was likely to be higher than Vinci's "by a somewhat significant amount".
"They are sort of overpaying to make sure they stay in the process and are eventually chosen by the sellers to be the last man standing," the third source said, adding that Vinci was counting on ADP's government ties scuppering its chances.
TAV shareholders, construction firm Tepe Insaat and Akfen Holding, are selling 18 percent stakes each, sources have said. Minority shareholders will also sell their stakes, although the total size of the stake has yet to be determined.
The third source close to the transaction said the stake would be kept below the level at which it would trigger a mandatory buyout offer for all outstanding shares - likely somewhere between 35 and 40 percent.
The deal will value all of TAV at more than $2 billion, the source said. The company's current market capitalisation is 3.22 billion Turkish lira or $1.84 billion.
ADP was not available to comment. (Additional reporting by Julien Ponthus and Cyril Altmeyer in Paris and Seda Sezer and Asli Kandemir in Istanbul; Editing by Caroline Jacobs and David Cowell)