A consortium formed by South Korean private equity fund STIC Investments and Hana Daetoo Securities was picked as the preferred bidder to acquire a 49 percent stake in unlisted defense company LIG Nex1 worth around $440 million, a source said on Thursday.

The consortium is set to pay between 400 and 500 billion Korean won ($354-$443 million) for the stake, said the source with direct knowledge of the matter. Local media had previously estimated the deal value to be about 500 billion won.

The source declined to be identified because the negotiations are private.

Some five firms had submitted main bids for the stake in the South Korean missile maker earlier this month, including four local private equity firms and a listed European defense company.

The source said the unnamed European defense firm remains interested in the stake, but the firm would have to wait for the end of the STIC-Hana consortium's exclusivity period on August 24 to possibly submit a new proposal.

The result of negotiations between LIG Group and the STIC-Hana consortium included a condition specifying an initial public offering of LIG Nex1 in the next four years, the source added.

LIG Nex1, which makes anti-submarine, cruise missiles and weapons systems, is owned by LIG Corp, a holding company that is part of LIG Group. Citigroup (C.N) is managing the deal. ($1 = 1129.6500 Korean won)

This article is copyrighted by Reuters