(Reuters) - Retailer Ace Hardware Corp [ACEHW.UL] and investment firm Centerbridge Partners LP are together eyeing an offer for bankrupt Sears Holdings Corp's SHLD.PK home services division that would compete with an expected bid from Chairman Eddie Lampert, people familiar with the matter said on Monday.

FILE PHOTO: A store closing sale sign is posted next to a Sears logo in New Hyde Park, New York, U.S., October 10, 2018. REUTERS/Shannon Stapleton/File Photo

Wednesday is the deadline for initial offers in a bankruptcy auction for the home services business, the largest U.S. appliance repair provider, and other Sears assets, according to a November letter from the company’s bankers to prospective bidders. The group eyeing the home services division has studied a possible bid for weeks, though there is no guarantee an offer will materialize, the sources said.

Sears is also negotiating with Lampert’s hedge fund, ESL Investments Inc, on a potential deal to acquire stores and businesses that would aim to keep the 125-year-old retailer operating as a going concern, according to court papers and people familiar with the discussions.

The sources did not give a value for a potential offer from Centerbridge and Ace, which has more than 5,000 stores globally. Earlier this year, ESL offered to buy parts of the home services division with a collective enterprise value of $500 million.

A Sears spokesman declined to comment. An Ace representative did not immediately respond to a request for comment and a Centerbridge spokesman declined to comment.

Lampert, who stepped down as chief executive officer when Sears filed for bankruptcy protection Oct. 15, is the company’s largest creditor and shareholder. ESL’s takeover bid for Sears is initially expected to eclipse $2 billion, an amount that would repay senior lenders, said people familiar with the matter.

ESL also plans to forgive some Sears debt it holds in exchange for acquiring assets to finance its offer, a bankruptcy maneuver known as credit bidding, these sources said.

The sources cautioned that the exact structure and value of the ESL bid could change as Sears repays creditors. An ESL spokesman declined to comment on specific details of the hedge fund’s offer.

Sears is also fielding offers for separate pieces of the department-store chain as well as bids from liquidators that would shut down the company, according to the November letter from the company’s bankers.

While Sears prefers selling most assets together, it may sell pieces to different buyers, further breaking apart what was once the world’s largest retailer.

Sears faces calls from some creditors, including landlords and bondholders, to wind down its business because they expect to collect more on their debts if the retailer liquidates, according to bankruptcy-court papers. The company has argued it has a plan to remain operating and preserve tens of thousands of jobs.

Sears faces a Dec. 15 deadline to find a bid that keeps it in business, according to court papers.

That deal can then be topped by other suitors in a court-supervised auction. Definitive bids are due Dec. 28, according to court papers.