SYDNEY, Feb 23 (Reuters) - Australia's AMP Ltd and former suitor U.S.-based Ares Management are close to agreeing a joint venture that would give the American fund control of its asset management business AMP Capital, a source with knowledge of the deal said.

The arrangement, which could be finalised and announced within the next week, would leverage Ares distribution networks to distribute AMP investment funds, the person said, asking not to be identified because the negotiations are private.

Representatives for AMP, which on Feb. 11 said Ares had withdrawn a A$6.36 billion ($5.03 billion) takeover offer for the whole company, declined to comment.

Representatives for Ares also declined to comment when contacted by Reuters.

Bloomberg reported on Tuesday the deal could value the asset management business at more than A$3 billion and AMP would retain a minority stake, citing people familiar with the matter.

Following reviews in the past six months that sought to find a buyer for AMP as a whole or its units, the Sydney-based firm last week said it had closed all but one of the processes.

Its wealth management businesses in Australia and New Zealand and a banking division, were no longer under review but it would continue in negotiations with Ares about a potential sale or partnership involving AMP Capital.

A deal was not certain, Chief Executive Francesco De Ferrari said at the time.

($1 = 1.2653 Australian dollars) (Reporting by Paulina Duran in Sydney; Editing by David Evans)