LONDON/FRANKFURT/MILAN (Reuters) - Italy's Benetton family is vying with motorbike firms and buyout funds for control of Italian motorcycle brand Ducati, which is being sold by Germany's Volkswagen VOWG_p.DE, sources involved in the process told Reuters.

The logo of Italian motorcycle manufacturer Ducati is seen in Dietlikon, Switzerland October 11, 2016. REUTERS/Arnd Wiegmann

Volkswagen, whose Audi NSUG.DE division controls Ducati, has received several tentative bids with the Benetton family's investment vehicle Edizione Holding valuing the Monster motorbike maker at $1.2 billion, one of the sources said.

Based in the Borgo Panigale district of the northern Italian city of Bologna, Ducati was launched in 1926 as a maker of vacuum tubes and radio components and its factory remained open during World War Two, despite several bombings.

Volkswagen, Europe's largest carmaker, is reviewing several assets including a possible sale of its majority-owned transmissions maker Renk ZARG.F in a bid to move beyond a diesel emissions-cheating scandal that has left it facing billions of dollars in fines and settlements.

As well as Edizione Holding, U.S. buyout fund Bain Capital, which owns a stake in Ski-Doo snowmobiles maker BRB, and two Indian motorbike firms, Eicher Motors EICH.NS and Bajaj Auto BAJA.NS, have also bid for Ducati, the sources said.

Indian carmaker Eicher controls Royal Enfield, a motorcycle brand established in 1893 which ranks as one of the oldest.

Strategic bidders also include U.S. automotive firm Polaris Industries PII.N, which earlier this year said it would wind down its struggling Victory Motorcycle brand.

A shortlist of bidders for a second stage of the auction could be selected as soon as Saturday, two of the sources said.

Volkswagen adviser Evercore has a long list of bidders including private equity funds such as Ducati’s previous owner Investindustrial, CVC Capital Partners, Advent and PAI, all hoping to outbid industry players, the sources said.

If it gets to the second round, Edizione Holding could seek to form a consortium with a financial investor, two of the sources said, in a bid to secure control of Ducati, whose racers have won the Superbike world championship 14 times, with Carl Fogarty and Troy Bayliss its most successful riders.

Audi, Edizione Holding, Investindustrial, Advent and PAI declined to comment, while the other interested groups were not immediately available for comment.

PRICING CHALLENGES

For some buyout funds, Ducati’s valuation of up to $1.4 billion -- which sources said is based on a multiple of more than 10 times its core earnings of roughly 100 million euros - is a tall order as they lack the synergies that some motorbike makers could achieve.

But Investindustrial founder Andrea Bonomi, who sold Ducati to Audi for about 860 million euros in 2012, is serious about a comeback, one of the sources said.

China's Loncin Motor 603766.SS was among a group of industry players that initially showed interest in Ducati, alongside Harley-Davidson HOG.N.

The latter has, however, decided against making a bid due to Ducati's price tag, while it could not be established if Loncin Motor 603766.SS had carried on bidding.

Harley Davidson and Loncin were not immediately available for comment.

A successful deal for Ducati, which last year had revenues of 731 million euros, would show Volkswagen boss Matthias Mueller is serious about reversing the company’s quest for size.

But offloading Ducati will need the blessing of Volkswagen’s powerful labor unions, which control half the seats on the carmaker’s 20-strong supervisory board, and recently repeated their opposition to a sale.

Volkswagen is expected to base its final decision on several factors other than just price, one of the sources said, including being able to sign a straightforward transaction and getting positive feedback from its unions.