Private equity group Clayton Dubilier & Rice (CD&R), as well as Wolong Electric (>> Wolong Electric Group Co., Ltd) and another Chinese company are conducting due diligence on Leroy-Somer and preparing to submit final bids this month, the sources said.

Emerson wants to focus its business on process automation and heating and air conditioning. In April it launched the sale of its Motors and Drives unit, which consists mainly of Leroy- Somer which makes alternators for power producers and industrial applications. It aims to chose a buyer before the August summer break, one of the sources said.

CD&R declined to comment, while Emerson and Wolong were not immediately available for comment.

Strategic buyers often have an edge over private equity groups in such acquisitions as they are usually able to reap cost savings from combining their own with the acquired business.

In this case, however, private equity investor CD&R is seen as having the advantage of deep knowledge of the business.

One of its partners, James G. Berges, is a former vice chairman and president of Emerson, where he was among executives responsible for the company's motors and appliance components businesses. George Tamke, a retired operating partner at CD&R, is a former co-CEO of Emerson.

Wolong Electric, which has bought several smaller companies this year, would, if successful in the sale, add to a string of recent Chinese acquisitions in Europe.

They include home appliance maker Midea's planned purchase of German robots maker Kuka (>> KUKA AG), China Three Gorges' acquisition of offshore wind group Meerwind and the sale of Italian soccer club Inter Milan to Chinese electronics retailer Suning Commerce Group Co Ltd (>> Suning Commerce Group Co Ltd).

Given Leroy-Somer's exposure to military activities, the French government may need to give its green light before any deal can be completed, sources familiar with the matter have said. A spokesman for the French economy ministry was not immediately available for comment.

(Editing by Susan Fenton)

By Arno Schuetze and Gilles Guillaume