UPDATE 2-Aperam forms joint venture to bid for Outokumpu's Terni
* Stainless steel firm Outokumpu must sell mill by May 7
* Aperam, Arvedi and Marcegaglia form JV to bid
* Outokumpu shares rise 4 pct (Adds Outokumpu, analyst comments, share reactions, background)
HELSINKI/BRUSSELS, Feb 20 (Reuters) - Luxembourg-based stainless steel maker Aperam has teamed up with two Italian peers to bid for Outokumpu's Terni plant in Italy, boosting hopes the Finnish company will find a buyer for the mill.
Outokumpu has committed to sell the Terni mill by May 7 to gain regulatory approval for its purchase of ThyssenKrupp's stainless steel business Inoxum last year.
Analysts have said the sale of Terni could dilute some of the benefits of the Inoxum deal and getting a good price could be tough due to the deadline and a weak market.
Steel makers across the world are struggling to cope with overcapacity as Europe's debt crisis has hit construction and industrial production. A slowdown in China's economic growth has also weighed on steel prices.
Aperam, which had earlier flagged its interest for the highly-efficient Terni mill, said it would be the majority shareholder of the joint venture, while the two Italian firms - Arvedi and Marcegaglia - would have equal minority shareholdings.
Outokumpu said it had not made any decisions yet, adding it had several potential buyers for the plant. It has said it expects to sign a deal during the second quarter.
Industry sources have said at least five private equity firms have shown interest in buying the plant, including JP Morgan's private equity arm.
Shares in Outokumpu rose 4 percent to 0.73 euros in early Helsinki trade. Aperam shares were up 2.5 percent at 11.16 euros.
"This is a somewhat positive sign for Outokumpu, having a clear buyer candidate now. It seems like Aperam could not buy the mill alone due to competition reasons," said analyst Johannes Grasberger from Nordea Markets.
"It is difficult to say where the price will go in this kind of weak market situation ... But looking at Outokumpu's finances, they would need to get about 500 million euros," he added.
Outokumpu, the world's No. 1 stainless steel producer after the Inoxum acquisition, last week launched a cost-cutting plan following a quarterly loss of 220 million euros. (Reporting by Jussi Rosendahl and Ben Deighton; Editing by Jane Merriman and Mark Potter)