The brands being sold, which also include Deer Park, Ozarka, Ice Mountain, Zephyrhills and Arrowhead, could fetch around $5 billion, said one of the sources, based on core earnings of around $600 million.
Nestle boss Mark Schneider - who has bought and sold around 50 businesses since taking over in 2017 - wants to retain control of premium water brands like Perrier and San Pellegrino and sell the rest of the portfolio.
He said in June he wanted Nestle to shift its focus to better performing water brands which include Acqua Panna while the rest of the business was being put under review.
Private equity funds including Apollo, that focus on turnaround deals and cutting costs to improve profit, are expected to show interest, the sources said.
Morgan Stanley is running the sale which has also drawn interest from some industry players, one of the sources said.
Dutch bottling company Refresco, which has a large business in the United States, is among those who could explore a bid, either alone or teamed up with a financial investor, two of the sources said.
Primo Water and Niagara Bottling may also join the race for all or part of the portfolio, they said.
Nestle wants first-round bids by the end of October, according to one of the sources.
Nestle, Refresco and Morgan Stanley declined to comment while Apollo, Primo and Niagara were not immediately available.
The assets on the block generated 3.4 billion Swiss francs ($3.72 billion) in 2019 sales.
Guggenheim analysts said last year the water brands were declining at roughly 2 percent, without the impact of coronavirus, and could fetch $4.9 billion-$5.9 billion.
Yet, Jefferies estimated a price closer to 3 billion Swiss francs ($3.28 billion), adding Nestle had lost market share to private labels, while growth in the industry remains with sparkling brands like La Croix and PepsiCo's Bubly.
(Reporting by Martinne Geller and Pamela Barbaglia;Editing by Elaine Hardcastle)
By Martinne Geller and Pamela Barbaglia