Siemens has picked Goldman Sachs to advise on the sale of its Water Technologies unit, part of the engineering conglomerate's efforts to streamline operations and stay competitive in a weak global economy, two people familiar with the matter said.
The sale may be launched officially in the second quarter, the sources added.
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Siemens and Goldman Sachs declined to comment.
Siemens, Germany's second-most valuable company which makes products ranging from fast trains and gas turbines to hearing aids, in November announced it plans to sell the water unit with annual sales of about 1 billion euros ($1.35 billion).
Since then, several possible bidders have approached the Munich-based group and investment bankers have started to work on the topic, the sources said.
Siemens built up its water technology operations through a flurry of acquisitions over the last decade. Among others, it bought the water systems and services division of US Filter from Veolia Environnement for $1 billion in 2004.
Since much of Siemens's water business is focused on North America, industry sources expect U.S.-based peers Xylem and Pentair to take a look at the asset.
"Asian companies are also likely to throw their hats into the ring," one of the people said. The region was experiencing rapid economic growth, climate change impacts, rising populations and stricter energy and water regulations and is therefore expected to see heavy investment in water treatment equipment in coming years, he said.
Kurita <6370.T>, Hyflux , Hitachi <6501.T>, Marubeni <8002.T> are seen as possible suitors, he added.
Big private equity groups like KKR, Bain or Permira are also expected to show interest.
Permira in 2011 bought Israel-based Netafim, a maker of irrigation technology, for 800 million euros.
Siemens Water Technologies offers technology ranging from conventional water treatment to emergency water supply and water disinfection systems.
A report published in 2010 by Global Water Intelligence, an industry journal, put the size of the global water market at more than $500 billion.
($1 = 0.7421 euros)
(Reporting by Arno Schuetze; Additional reporting by Jens Hack; Editing by Hans-Juergen Peters)