UPDATE 1-EQT frontrunner for Siemens hearing-aids business -sources

(adds detail, background, sources)

FRANKFURT/LONDON, Oct 21 (Reuters) - German engineering group Siemens is in advanced talks to sell its hearing-aids business for more than 2 billion euros ($2.5 billion), with private equity firm EQT the frontrunner, two people familiar with the matter said.

EQT was one of three parties to submit binding bids for Siemens Audiology Solutions by last Friday, along with fellow private equity firm Permira and Danish hearing-aids maker GN Store Nord, another source close to the matter said.

Siemens, EQT, Permira and GN declined to comment.

Bloomberg had reported earlier that EQT was the frontrunner to buy the business.

Siemens this year announced plans to list its audiology unit, but declining equity markets have made such a move less attractive and sources told Reuters in August that the group was renewing efforts to divest the business.

Another two sources close to the matter said that Siemens had not given up on the idea of a possible initial public offering (IPO), despite rocky equity markets that have caused several IPOs to be pulled or delayed.

A spin-off to existing shareholders is also an option.

Siemens’ Chief Executive Joe Kaeser is seeking to focus the group on its most promising businesses to close the gap on more profitable competitors such as Switzerland’s ABB and United States-based General Electric.

The German trains-to-turbines group has sold or spun off a string of assets in the past decade but failed to find a buyer for Siemens Audiology Solutions four years ago.

Sources familiar with the business, whose accounts Siemens does not publish separately, have said it has annual sales of about 700 million euros and core earnings of 160-170 million. ($1 = 0.7859 euro) (Reporting by Freya Berry, Alexander Hübner, Jens Hack and Arno Schuetze; Writing by Maria Sheahan and Georgina Prodhan; Editing by Pravin Char and David Goodman)