By Arno Schuetze

FRANKFURT (Reuters) - Germany's Ottobock, the world's largest maker of artificial limbs, has attracted interest from private equity groups including KKR <KKR.N> and CVC for a 20 percent stake in its core business, people familiar with the matter said on Monday.

The suitors for the stake in its core healthcare division also include buyout firms BC Partners and Advent, the people told Reuters.

The privately held company, owned by the founder's grandson Hans Georg Naeder, said on Friday it was targeting private equity firms, affluent families and technology funds as potential buyers in a deal to be completed by the end of June, ahead of an initial public offering at a later stage.

Ottobock, which started in 1919 as a maker of prosthetics for World War One veterans, said it was currently valued at about 3 billion euros ($3.2 billion) and that it was being advised by J.P. Morgan in the planned stake sale.

Ottobock, an official partner of the International Paralympic Committee, is seeking financial backing to develop more bionic devices; prosthetic limbs and orthotic braces closely modeled on natural mechanisms.

The deal would help it to pursue "even quicker profitable growth and groundbreaking innovations for the people suffering a handicap", Naeder said in the statement.

The valuation would equate to a multiple of 12 times its expected 2017 earnings before interest, tax, depreciation and amortization of 250 million euros, a discount to some rivals as the business includes its lower-margin wheelchair business, one of the people said.

Peer Iceland's Ossur <OSSRu.IC> trades at 14.7 times its expected core earnings.

The investment firms and Ottobock declined to comment.

The company said last October it was considering the sale for up to 240 million euros of its Ottobock Kunststoff division, a maker of engineering foams, to focus on healthcare.

Ottobock reported sales of 1.031 billion euros for 2015, of which 847.7 million euros came from its main healthcare unit.

The company said in July 2015 it wanted to go public in 2017, possibly floating a stake of 25 percent with Naeder staying in control. It declined to provide a more specific timeline for the IPO on Monday.

($1 = 0.9310 euros)

(Writing by Ludwig Burger; Additional reporting by Alexander Huebner; Editing by Susan Thomas/Keith Weir)