UPDATE 1-Sharper Image says best bid is $51.25 mln

(Updates with details from statement, CEO comment, background)

By Emily Chasan

NEW YORK, May 16 (Reuters) - Bankrupt gadget retailer Sharper Image Corp (SHRPQ.PK) said on Friday the best bid it received is a cash payment of $51.25 million, plus other consideration, from a group of privately funded investors.

The offer, made by a joint venture led by private investment groups Hilco Consumer Capital and Gordon Brothers, was approved as the stalking-horse bid for the company earlier this week.

In a stalking-horse bid, the bankrupt company chooses the entity from a pool of bidders to make the first bid for its assets.

Sharper Image's chief executive, turnaround specialist Robert Conway, said in a statement that the offer was "the best offer that the Company has received in connection with the proposed sale to date, and promises to help maximize the value of the company's assets by creating a competitive bidding environment."

The retail chain's former chairman Jerry Levin also publicly expressed interest in rounding up investors to make a bid for some or all of the company, when he resigned in April.

An auction for the company's assets will be held on May 28.

The company filed for bankruptcy protection in February after three years of losses and litigation involving its Ionic Breeze air purifiers.

A year ago, the company had a stock market capitalization of more than $158 million.

In April, it said it would put itself up for sale, saying a sale was the best option given the weak economy and tight credit markets. (Reporting by Emily Chasan; Editing by Derek Caney)