Japan's Shinsei, Aozora in merger talks - sources

TOKYO, May 13 (Reuters) - Shinsei Bank (8303.T) and Aozora Bank (8304.T), two struggling Japanese lenders controlled by U.S. funds, have entered formal talks to merge and could announce their intention as early as Wednesday, sources said.

The banks had already been discussing the possibility of a merger, but did not cover specifics, the sources said. Now, the two lenders will begin to survey each other's assets and work out a merger ratio, said the sources, who were not authorised to speak on the record.

The banks had originally planned to outline the merger on Wednesday, but that was delayed by both of their top shareholders, the sources said.

Shinsei is nearly one-third owned by buyout firm JC Flowers and Co, while Aozora is majority owned by private equity firm Cerberus Capital Management [CBS.UL]. (Reporting by Taro Fuse, writing by David Dolan)