FRANKFURT/MOSCOW (Reuters) - Europe's fourth-biggest retailer Metro AG (>> METRO AG) is considering floating a 25 percent stake in its Cash & Carry Russia unit in the European spring, three sources familiar with the deal said on Wednesday.

The initial public offering (IPO) could value the unit at no less than 4 billion euros ($5.4 billion), one of the sources said.

It will be competing for investors' attention with local rival Lenta, which is also planning to float in London early next year. Lenta is controlled by state bank VTB (>> Bank VTB OAO) and private equity fund TPG .

The Metro listing would take place in London, with a secondary listing possibly in Moscow, another of the sources said. The sources said the listing could take place in the spring or the second quarter of 2014.

Banks have not yet been mandated to organise the flotation, the sources added. Sources on Tuesday told Reuters that the banks likely to work on the IPO are Sberbank (>> Sberbank Rossii OAO) and Goldman Sachs (>> Goldman Sachs Group Inc).

"Investors do not get a chance to invest into a such growth asset every day", said a capital markets banker, who has discussed a possible listing of Cash & Carry Russia with Metro. "Investors looking at Russia fear the unpredictability of corporate governance - a concern they don't have in Metro's case."

"Metro wants the IPO to show the value of the Russian business - but to keep as much of it as possible," the banker said. "At the most, they'll sell 25 pct in the IPO."

Analysts said the high-margin business could be sold at a lofty valuation with Citi estimating it could be worth up to 8 billion euros.

"Metro C&C Russia is the star operation of the group," Citi's analysts said in a research note. "There may be some ?hidden value' revealed by listing Russia."

Analysts at JPMorgan estimated that Metro C&C Russia will have sales of 4.6 billion euros in 2013 to 2014 and net profit of 375 million euros. At a price/earnings ratio of 20 times, this could value the company at 7.5 billion euros, the analysts said.

Metro declined to comment.

(This story was refiled add dropped words in headline)

(Reporting by Matthias Inverardi and Arno Schuetze in Frankfurt, Megan Davies and Olga Popova in Moscow; Editing by Victoria Bryan, Maria Kiselyova)