(Adds share price, companies' response, background)
By Pamela Barbaglia and Danilo Masoni
LONDON/MILAN, Feb 23 (Reuters) - Italian industrial conglomerate Finmeccanica is set to announce the sale of its shares in rail and signalling units AnsaldoBreda and Ansaldo STS to Japan's Hitachi as soon as Tuesday, a source close to the matter said on Monday.
The deal, which would thwart a rival offer from China's Insgima Group, is poised to be signed in the next 12 hours after receiving the green light at a board meeting on Friday, the source said.
Spokesmen at Finmeccanica and Hitachi declined to comment.
Finmeccanica has full control of loss-making train company AnsaldoBreda and owns 40 percent of Milan-listed rail signalling group Ansaldo STS.
The sale of a 40 percent stake within Ansaldo STS would trigger a mandatory takeover offer by Hitachi for the whole company which has a market capitalisation of 1.77 billion euros ($2.01 billion).
Shares in Finmeccanica rose to their highest level since July 2010 on Monday on expectations of an imminent deal. The stock closed up 5.8 percent at 10.93 euros.
Finmeccanica has struggled to sell its rail businesses together because AnsaldoBreda has long been a drag on the Italian defence group's results.
But while Ansaldo STS is considered an attractive prospect for Hitachi, it might not command a high premium as the Japanese group will need to turn around the train-making division and beef up its balance sheet.
Shares in Ansaldo STS were down almost 1 percent on Monday on expectations that the asset would not fetch a premium.
In the first nine months of 2014 the two units contributed combined earnings before interest, tax and amortisation of 39 million euros to Finmeccanica results, against a loss of 15 million euros in the same period of 2013.
AnsaldoBreda had a negative value of 150 million euros in 2014, according to one analyst estimate. It posted a loss before interest and tax of 227 million euros in 2013.
A bundled sale of the two units would help the state-controlled industrial conglomerate focus on its core business areas of aerospace, defence and security and cut net debt following a downgrade to junk status in 2013.
A spin off of Finmeccanica's rail assets would also pave the way to a larger defence deal in the U.S. where the Italian conglomerate on Jan. 28 announced plans to sell shares within its U.S. defence contractor DRS Technologies.
Banca Akros reiterated its buy rating on the stock on Monday and lifted its price target to 13 euros from 10.50 euros previously. ($1 = 0.8825 euros) (Editing by Sophie Sassard and Susan Thomas)