NEW YORK (CNN/Money) - Leveraged buyout firm Fox Paine & Co. has launched a bidding war for Arthur Andersen LLP's tax unit and has signed a memorandum of intent to buy the entire practice, a source familiar with the negotiations told CNN/Money.

The offer would include Andersen's 4,000 professional and support staff across the United States, the source said.

The bid from Fox Paine challenges an offer made by Deloitte & Touche last week. The Deloitte proposal calls for a significant number of Andersen's U.S. tax partners and tax professionals to join Deloitte.

Andersen last week also inked a tentative deal with KPMG LLP where 400 Andersen partners and staff in the western United States would join KPMG, a separate source familiar with situation told CNN/Money.

The Wall Street Journal reported Tuesday that Fox Paine is offering $800 million to $900 million for the unit. However, some consider the proposed amount high.

San Francisco-based Fox Paine is expected to make a statement later Tuesday, the person said.

The competing offers comes as Andersen is struggling to settle a federal indictment against the firm. The Justice Department on March 14 issued a one-count criminal charge against Andersen for allegedly obstructing justice when it shredded Enron Corp. documents.

Andersen auditor David Duncan is set to plead guilty Tuesday to an obstruction charge and will cooperate with federal prosecutors in the government's criminal case against Andersen, a separate source told CNNfn. Andersen fired Duncan in January and has attempted to place the blame for the shredding of Enron documents on the former partner and other Andersen staff in Houston, while maintaining that senior management did not authorize the document destruction.

Andersen served as Enron's auditor for 16 years before it was fired in January. Houston-based Enron allegedly used questionable partnerships to inflate profits and hide nearly $1 billion in debt. Andersen, as Enron's auditor, signed off on Enron's financial statements.

Since the March indictment, Andersen has teetered on collapse and has lost more than 100 public audit clients. The auditor called off its global merger with KPMG International, which would have combined the firms's overseas operations. Since then, individual practices have launched deals with rival firms.

Andersen's Norway practice agreed Tuesday to merge with Ernst & Young effective May 1, Ernst said in a statement. The combined company, which will assume the Ernst name, will have more than 1,400 persons and serve just under 40 percent of major companies in Norway.

Norway's defection follows a deal by Andersen's Brazil practice to merge with Deloitte Monday.

The Chicago-based accounting firm also announced Monday that it plans to lay off 7,000 employees, or 27 percent, of its staff in the United States. The layoffs, which will be implemented in the next several months, will primarily affect Andersen's audit practice and back-office administration.

Fox Paine and KPMG declined to comment. Deloitte and Andersen could not be reached for comment.