AOL Time Warner is closing in on a deal to sell the DVD- and CD-manufacturing operations of Warner Music Group for a possible $1 billion, The Wall Street Journal reported Tuesday.

The company has received two bids for the business by last Friday's deadline, but neither bidder currently has the edge, The Journal reported, citing people familiar with the matter.

One was from a private-equity group led by Jim Caparro, CEO of WEA, the division of WMG that includes the manufacturing operations. Caparro’s backers include Apollo Advisors and Thomas H. Lee Partners. The other bid is from Canada’s Cinram International.

AOL Time Warner would likely try to negotiate a deal ahead of its earnings report next week, The Journal said, so it could show investors how it was cutting back on debt. The company has put a number of assets, including its sports teams, on the auction block as part of an effort to cut its debt to $20 billion by the end of next year. At the end of March, AOL's net debt was about $26 billion.

The sale of its Atlanta Hawks basketball and Thrashers hockey teams to Texas businessman David McDavid could come as early as this week as well, a source told Reuters on Monday.

While AOL has been working on the sale of WMG’s manufacturing, it has also been negotiating the possible merger of the recorded-music operations of WMG with Bertelsmann’s BMG unit. Those talks are progressing, although a deal is thought to be several weeks away. If such a deal is struck, Warner would likely sell its music-publishing business too, raising an additional $1 billion, the Wall Street Journal said.

As far as the manufacturing sale goes, Caparro’s group is likely to argue to AOL that it can provide the easiest transition and understands the needs of the film and music division better than Cinram, the Journal asserts. However, the Canadian company already handles DVD manufacturing for some U.S. film companies and might be more used to negotiating such deals.