UPDATE 2-Avenue Capital nears deal for China medical firm

* Deal seen worth over $100 million

* Avenue expected to be new owner of Landwind

* Citi's CVCI now backs Landwind with 70 percent stake (Adds sources' comments, rival bids and details)

By George Chen, Asia Private Equity Correspondent

HONG KONG, Oct 20 (Reuters) - Hedge fund Avenue Capital is in the final stages of talks to buy a Chinese medical equipment company backed by a unit of Citigroup Inc (C.N: Quote, Profile, Research) in a deal worth over $100 million, sources familiar with the situation said on Tuesday.

The exclusive talks for Shenzhen-based Landwind between Avenue Capital, one of the world's largest hedge funds, and Citi Venture Capital International (CVCI) came after Bain Capital and other private equity funds dropped their bids, said the sources.

A deal for Landwind would mark a rare occasion whereby a hedge fund outbids a private equity firm for control of a company. Hedge funds such as Avenue, run by billionaire Marc Lasry, have built up their presence in Asia in the last few years, participating in more and more private equity-style deals.

No agreement has been signed yet and the talks between Avenue Capital, which has about $18 billion assets under management, and CVCI could collapse if they are unable to agree on specific financial details, said the sources without elaborating.

If successful, it would become the biggest investment for Avenue Capital in China. The New York-based fund, where Chelsea Clinton -- daughter of former U.S. president Bill Clinton -- has worked, previously made smaller co-investments with other funds in China in the past few years.