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FRANKFURT, Nov 26 (Reuters) - Switzerland's Gategroup is nearing a deal to buy the European operations of Lufthansa's LSG catering unit, which the carrier has offered for sale as it struggles with low margins in a competitive market, three people close to the matter said.
An announcement of the deal is expected after a meeting of Lufthansa's supervisory board on Dec. 3, two of the people said.
Lufthansa and Gategroup declined to comment.
Airline catering company Gategroup's offer topped that of industry rival Do&Co and the two had been the last remaining contenders in a long drawn out auction, the sources said. Do&Co had no immediate comment.
Gategroup is owned by Singapore state fund Temasek and Asian investment firm RRJ Capital, who took over the company in several steps from Chinese conglomerate HNA. Gategroup operates the Gategourmet brand.
The catering business is challenged by a large number of locations it serves, high staff costs and exposure to currency exchange rates, Lufthansa's Chief Executive Carsten Spohr said earlier this year.
Union verdi had urged Lufthansa to scrap the sale or at least to make sure that jobs and employee rights are preserved in any deal.
The sale of LSG's European operations will be followed by an auction for its international business, which is expected to start in the first quarter, the sources added.
In its third quarter report, Lufthansa had said the formal sales process for LSG's European catering activities and the negotiation on a follow-on catering contract was progressing, with results expected year-end.
While details about the purchase price did not yet emerge, company sources had said in the past Lufthansa may receive just a small amount of money for LSG's European operations.
In its financial report, Lufthansa had said that assets held for sale worth 393 million euros and liabilities worth 639 million relate to the planned disposal of its European catering activities.
In the first six months, Lufthansa's catering revenues increased by 4% to 1.6 billion euros, while earnings before interest and tax contracted by 18% to 33 million. (Reporting by Arno Schuetze and Klaus Lauer; editing by Thomas Seythal and Alexandra Hudson)