Leading global private equity firms are this week finalising their first-round bids to acquire a major stake in the mobile devices division of Huawei, the Chinese telecommunications equipment maker.

Huawei, which is best known for making routers and wireless products for mobile operators, is hoping to divest a sizeable stake in the unit to a private equity firm that can help it to develop its sales in the US.

The initial non-binding bids, due by June 23, are expected to value the division at $3bn, according to people familiar with the matter, although the final price will depend on whether Huawei agrees to cede majority control.

Huawei had been prepared to divest a 49 per cent stake but is now considering selling more if a private equity firm is willing to offer a control premium.

Among those considering making a bid are Bain Capital, Blackstone, TPG and Kohlberg Kravis Roberts, although people familiar with the matter said that up to 20 firms had been contacted about the sale.

According to people who have seen the information memorandum produced by Morgan Stanley, the adviser hired by Huawei, the unit is this year expected to post revenues of $3.5bn and produce net profits of about $400m. Morgan Stanley declined to comment.

The potential acquisition of a stake is regarded by private equity firms as a rare opportunity to deploy a sizeable amount of money in a growing Chinese firm, although the challenging credit markets are likely to limit the sizes of the bids.

One person familiar with the sale process said: "These are early days and it is likely that private equity firms will join together in the next round. Writing a cheque for more than $1.5bn is not easy at the moment."

Another said: "The handset business is low margin and global competition is fierce so some of the valuations being talked about are optimistic. But the unit has lots of potential growth products and quite a few financial sponsors will be keen to be part of this game."

The mobile devices unit makes handsets, modems, convergence terminals and wireless internet cards - with handsets accounting for about half of the division's sales.

The unit's sales accounted for 16.4 per cent of Huawei's group revenues last year.

Privately held Huawei, which is based in Shenzhen, has become a global player in areas such as telecoms equipment manufacturing.

The Financial Times revealed yesterday that Huawei had been hired to upgrade the infrastructure of Play, a Polish mobile phone operator, highlighting its increasing success in securing contracts in Europe.

Source:ft.com