DUESSELDORF, Germany (Reuters) - German retailer Metro (>> METRO AG) confirmed on Wednesday that it was in talks over the sale of its department store chain Kaufhof.

A Metro spokesman said the group had not reached any decisions yet and repeated a long-standing position that conditions for a sale were appropriate price, a convincing concept for the future of the chain, and solid financing.

Sources told Reuters earlier on Wednesday that the bidding for Kaufhof is heating up, with the owner of rival Karstadt making a new takeover offer and talks with Canadian retailer Hudson's Bay (>> Hudson's Bay Co) continuing.

Shares in Metro rose as much as 3.6 percent to a two-week high in early trade on Wednesday, but later pared their gains to trade up 0.9 percent at 1033 GMT.

Metro has long said it would be prepared to sell the department store chain for a fair price as it focuses on developing its cash-and-carry and consumer electronics businesses.

Two people familiar with the matter told Reuters on Wednesday that Canada's Hudson's Bay had examined Kaufhof's books but had not yet made a formal offer.

Sources had told Reuters last month that the company, which operates Hudson’s Bay in Canada and U.S. luxury chains Saks Fifth Avenue and Lord & Taylor, was interested in Kaufhof.

Austrian investor Rene Benko, who owns Karstadt via his Signa Holding vehicle, has also looked at the books and has made a fresh bid for Kaufhof, one person had said on Tuesday.

Speculation has surfaced often that Benko wants to merge Germany's two major department store chains.

Benko bid for Kaufhof at the end of 2011, but Metro put the sale on ice at the start of 2012. However, Benko seems prepared to make more concessions this time, including keeping the Kaufhof head office in Cologne, one source said.

German daily business paper Handelsblatt put Benko's offer around 2.9 billion euros ($3.21 billion), citing sources.

Commerzbank analyst Juergen Elfers said the fact two parties are interested in Kaufhof could help drive up the price.

"Such a bidding scenario would be good news for shareholders as this would raise the probability of a deal emerging this time around," he wrote in a note.

Signa declined to comment, while HBC was not immediately available for comment.

(Reporting by Matthias Inverardi; Writing by Maria Sheahan; Editing by Kirsti Knolle/Jeremy Gaunt)

By Matthias Inverardi

Stocks treated in this article : METRO AG, Hudson's Bay Co