Suez and Veolia, its longstanding competitor and now its top investor with a 29.9% stake, have been locked for months in a bitter dispute, which has descended into a tit-for-tat in court.

Suez said on Sunday that French investment fund Ardian and U.S.-based Global Infrastructure Partners (GIP) had formulated a letter of intent proposing various investment scenarios, including possibly a bid for the whole company.

It is not yet clear that a full offer will emerge, and Mathias Burghardt, the head of Ardian Infrastructure within the group, told Reuters that any investment would be conditional on an agreement between Suez and Veolia.

Veolia said on Sunday its 29.9% stake was not for sale.

Suez shares were up 2.8% at 0925 GMT while Veolia was down 3.9%.

"We see this as a potentially positive outcome for Suez shareholders, given that with two deals on the table, an increased counter offer could be likely," analysts at Jefferies said in a note.

Veolia bought its stake in Suez in October as a prelude to a full takeover offer at 18 euros per share, valuing the company at 11.3 billion euros.

It has yet to launch the offer for the shares it does not own, however, and had pledged to try and win approval from Suez's board.

Suez CEO Bertrand Camus said on Sunday that Ardian and GIP's investment could take different forms, although he did not specify which. He said Suez was now open to a dialogue with Veolia, based on various scenarios involving the two funds. A takeover offer from the funds would also be at 18 euros per share, Suez said.

(Reporting by Sarah White and Gwenaelle Barzic; editing by Jason Neely)