The private equity firms Bain Capital and Silver Lake have submitted formal offers for a stake in the mobile handset division of Huawei Technologies, people involved with the matter said.

It appears that Bain and Silver Lake are the remaining bidders for a controlling stake in the unit of China's largest mobile phone equipment maker. Formal bids for the deal were due last Friday and the auction has proceeded despite turmoil in global markets.

The unit was expected to be worth more than $3.5 billion when the auction started earlier this year.

Though a firm may still pay a premium for a stake of more than 50 percent in the business, growing pressure on the handset sector plus volatile financial markets make it less likely that buyers will want to pay more for the asset, the people say. They did not want to be named because of the deal's sensitivity.

Silver Lake and Morgan Stanley, the bank running the auction, declined to comment. Huawei and Bain did not immediately respond to calls seeking comment.

Several private equity firms including AEA Investors, General Atlantic, Providence Equity Partners and the buyout arm of Goldman Sachs are no longer part of the process, the people said, making the Huawei deal a two-horse race.

It is possible that Bain and Silver Lake could team up and buy the stake together, the people said. Other parties could rejoin the process as well.

Privately held Huawei hired Morgan Stanley in May to sell a majority stake in the unit, which is made up of five business groups, among them mobile handsets, data cards for laptops and routers for home use.

A U.S. partner would give the company, based in the southern Chinese city of Shenzhen, the expertise to beef up its presence in the United States.

Huawei's mobile devices unit doubled revenues last year to more than $2 billion, people have said.

Bain teamed up with Huawei in a bid for the U.S. telecoms gear maker 3Com last year, but the deal was abandoned after U.S. regulators blocked it.

One of Bain's managing directors in Asia is Jonathan Zhu, Morgan Stanley's former chief executive for China and a veteran of telecom  deals.

source:Reuters