UPDATE 1-Cengage, Bain, Apollo eye McGraw-Hill unit-sources

(Adds details about company, bidders)

By Soyoung Kim and Nadia Damouni and Greg Roumeliotis NEW YORK, Oct 10 (Reuters) - McGraw-Hill Companies Inc's

education unit is expected to draw final bids fromprivate equity firms Bain Capital and Apollo Global Management

as well as rival Cengage Learning Inc, in a deal thatcould fetch around $3 billion, several people familiar with thematter said.

Cengage, the No. 2 U.S. college textbook publisher, and thetwo private equity firms are working on final offers forMcGraw-Hill Education, the world's second-largest educationcompany by sales, with the bids due later in October, the peoplesaid.

McGraw-Hill, which is running the auction as an alternativeto its planned spin-off of the business, wants to get more than$3 billion and could still decide against a sale if the bidsfail to meet its price expectations, the people said this week.

Other private equity firms that submitted initial bids thissummer, such as Thomas H. Lee Partners LP and Providence EquityPartners, dropped out because they felt the asking price was toohigh, according to the people familiar with the matter.

McGraw-Hill, Cengage, Apollo, THL and Providence declined tocomment. Bain did not immediately respond to requests forcomment.

McGraw-Hill Education, which had revenue of $2.3 billion andoperating income of $260 million in 2011, distributes itstextbooks in 65 languages across 157 countries. About 18 percentof the revenue is international, with digital-related solutionsaccounting for over 20 percent.

Cengage was acquired by Apax Partners LLP and OMERS CapitalPartners from Thomson Reuters Corp , the parent companyof Reuters News, for about $7.75 billion in cash in 2007.

The sale or spinoff of the education unit comes more than ayear after minority shareholders JANA Partners LLC and theOntario Teachers' Pension Plan publicly urged McGraw-Hill torestructure.

McGraw-Hill, which has since streamlined its portfolio andmade management changes, has said it would split into twopublicly traded companies - McGraw-Hill Financial andMcGraw-Hill Education.

The financial company will include credit ratings agencyStandard & Poor's, S&P stock indexes, Platts commodityinformation and S&P Capital IQ. The company also acceleratedstock buybacks and announced a drive to cut $100 million ofannual costs from its nearly $5 billion of expenses.

(Reporting by Soyoung Kim, Nadia Damouni and Greg Roumeliotisin New York; Editing by Richard Chang)

((soyoung.kim@thomsonreuters.com)(+1 646 223 6033))