US private equity firms Silver Lake and Providence Equity Partners have teamed up to bid for a stake in a unit of China's Huawei Technologies, a Reuters report said.
The Reuters report, citing sources involved in the process, also said the deal could fetch more than â‚¬1.25 billion (US$2 billion).
Another team is AEA Investors, a mid-sized private equity firm, and General Atlantic, according to one source involved in the process.
As mid-sized firms, that team would likely have to bring in a third partner to clinch Huawei's fast-growing mobile devices division.
US private equity firms have jumped at the chance to pursue the unit, attracted to its size and growth potential, not just in China but across the globe.
Huawei has made no secret of its plans to expand into the US.
If priced at more than â‚¬1.25 billion (US$2 billion), a Huawei deal would be the fifth largest cross-border inbound deal in China on record, and the largest so far this year, according to Thomson Reuters data.
It would be the second largest private equity deal in China ever, after ICBC's acquisition by an investor group comprising Goldman Sachs, Allianz and American Express.
Silver Lake and AEA were among the five firms that made it through round one of the Huawei auction, sources have said. Bain Capital, Goldman Sachs' private equity group and Kohlberg Kravis Roberts were the other firms that made it through.
All firms mentioned have declined to comment on the process.
As in any auction, teams can change and bidders can drop out at any minute. Bidders are reviewing financial documents for due diligence, and another round of offers is expected in the next few weeks, said the sources, who were not authorised to speak to the media.
A Huawei spokesman did not return a message seeking comment.