FRANKFURT China's Sinomach CNMAC.UL and France's Fives FLINSF.UL are set to split German-American machine tool maker MAG Group MAGIA.UL between them, two people familiar with the deal process said.
Sinomach is expected to sign a contract to acquire the European operations of MAG in February, while Fives is the only remaining bidder for the American operations, the sources said.
The sources did not disclose a possible price tag, but the combined group will likely reap more than 500 million euros ($668 million), sources have said in the past.
MAG declined to comment, while Sinomach and Fives were not immediately available for comment.
MAG's U.S. arm is owned by U.S. investor Mo Meidar, who built up MAG Group seven years ago by buying a number of industrial businesses - including units of ThyssenKrupp (TKAG.DE) and KUKA (KU2G.DE) - and restructuring them.
He later had to cede control over MAG's European division to banks including Deutsche Bank (DBKGn.DE) and Commerzbank (CBKG.DE).
MAG Group has annual sales of 1 billion euros and in 2011 posted earnings before interest, taxes, depreciation and amortization of 105 million euros. The group employs roughly 3,500 staff.
At the beginning of the auction, several other bidders from China showed interest in MAG in a sign that the appetite of Chinese groups for German technology, brands and distribution networks is high.
Chinese companies last year swooped in on a number of German groups, with Sany (600031.SS) acquiring machinery group Putzmeister and Hebei Lingyun (600480.SS) buying car parts maker Kiekert. Meanwhile, Shandong Heavy bought a 25 percent stake in fork lift truck maker Kion Group KIONG.UL.
The interest of Fives comes six months after the private equity arm of French insurer AXA (AXAF.PA) bought a stake in the French engineering group, promising to finance its growth plans. ($1 = 0.7477 euros)
(Reporting by Arno Schuetze and Alexander Hübner; additional reporting by Elena Berton)