TOKYO (Reuters) - Struggling Toshiba Corp (>> Toshiba Corp) plans to sell its entire medical equipment unit rather than just a controlling stake, people familiar with matter said, adding that aggressive bidding could value the business at much more than initial estimates of $3.5 billion (£3.2 billion).

The deal is seen as crucial to bolstering Toshiba's finances as the industrial conglomerate has been grappling with the fallout from a damaging accounting scandal. Rising restructuring costs have prompted management to pursue an entire sale of Toshiba Medical Systems Corp, the people said.

People familiar with sale process said a price tag between 400 billion yen to 500 billion yen (£3.2 billion to £4.02 billion) was a reasonable value for the unit. But one person said the deal value could go as high as 650 billion yen amid strong demand for medical businesses with high growth prospects.

Global buyout firm KKR & Co (>> KKR & Co. L.P.) as well as Canon Inc (>> Canon Inc), Fujifilm Holdings Corp (>> FUJIFILM Holdings Corp) and Konica Minolta Inc (>> Konica Minolta Inc), Japanese imaging firms with medical device units, have been shortlisted for the second round of bidding, they said. The deadline for the bids is Friday.

KKR has partnered with trading house Mitsui & Co (>> Mitsui & Co Ltd), while Konica Minolta has partnered with Permira [PERM.UL], the people added.

The people asked not to be identified because they are not authorised to speak to the media. Toshiba and representatives of all short-listed parties declined to comment on the deal.

Toshiba has previously said it was planning to sell either a controlling holding or the entire stake but has so far not specified which.

(Reporting by Junko Fujita and Emi Emoto; Editing by Edwina Gibbs)

By Junko Fujita and Emi Emoto