Bahrain-based private equity firm Investcorp's sale of Armacell is under threat as bids for the German insulation firm are due to come in lower than its 500 million euro ($653.30 million) price tag, said bankers.

Second-round bids in the Barclays -run sale process were due on March 11 but delayed after it emerged that potential buyers Charterhouse, HgCapital and Pamplona were likely to submit bids closer to 400 million euros, according to the bankers.

The transaction could now be scrapped altogether, they added. Investcorp declined to comment.

Armacell could add to a growing list of stalled sales during the eurozone crisis, including German measuring and materials handling equipment maker Schenck Process, which was pulled last year after owner IK Investment Partners deemed two offers for the business too low.

Germany-headquartered Armacell was bought by Investcorp in 2007 backed with 382.5 million euros of debt, according to Thomson Reuters LPC data.

It says it is the world's largest maker of flexible insulation, claiming 40 percent of the market, with its products used to lag pipes and ductwork in large buildings such as factories and schools.

The company has approximately 2,440 employees and 19 factories in 13 countries and had annual sales of around 448 million euros in 2011.

Bids for Armacell were seen coming in lower than the price tag after potential buyers were worried about Armacell's growth. "Fundamentally Armacell is a good business but it hasn't had the most credible or attractive growth story," one banker said.

Bankers had originally been preparing debt packages of around 350-400 million euros to back a buyout based on a 500 million euro enterprise value.

The debt packages were reduced to around 300 million euros or around 4.6 times Armacell's approximate 60 million euro EBITDA to take account of the lower bids.-Reuters