MILAN, May 20 (Reuters) - Elliott-backed Italian bad loan specialist Gardant has teamed up with state-owned rival AMCO in the race to secure the bad loan business put up for sale by Italy's fifth-largest bank BPER Banca, three sources with knowledge of the matter said.

Bids for BPER's bad loan recovery unit and a bad loan portfolio the bank will offload with the management unit are due in a couple of weeks, one of the sources said. A separate source said the portfolio could be of a total size of 2.5 billion euros ($2.6 billion).

Gardant is one of four major players on the Italian non-performing loan market BPER has invited to bid, two of the sources said, adding the other suitors were Sweden's Intrum , SofBank-backed doValue and Prelios, which is owned by U.S. fund Davidson Kempner.

A spokesperson for Intrum declined to comment on specific transactions but said "as Europe's market leading credit management servicer, it is part of our ongoing business to regularly monitor different opportunities across our markets."

None of the other parties had a comment.

BPER follows in the tracks of other main Italian banks which in recent years have parted ways with their loan management businesses, using the capital gain on the unit's sale to offset the hit from the parallel disposal of a large bad loan portfolio.

BPER said on Friday it will unveil a new business plan on June 10.

Fully-owned by Italy's Treasury, AMCO benefits from a lower cost of funding than rivals, which gives it an advantage when bidding for bad loan portfolios. ($1 = 0.9485 euros) (Reporting by Valentina Za Editing by Keith Weir)