UPDATE 1-U.S. e-commerce retailer Parent Co files for Chapter 11

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NEW YORK, Dec 28 (Reuters) - E-commerce company Parent Co KIDS.O, which has hedge fund D.E. Shaw & Co as a major shareholder, filed for Chapter 11 bankruptcy protection on Sunday and plans to sell off its assets as weakening consumer demand pummels U.S. retailers.

Parent Co, which changed its name from BabyUniverse in January, listed its total assets at $20.6 million and total debts at $35.7 million as of Dec. 22, according to its filing in U.S. Bankruptcy Court in Delaware.

D.E. Shaw held 63 percent of the company's shares outstanding as of Sept. 30, according to Reuters data. D.E. Shaw affiliates became large shareholders in the company in 2007 when eToys Direct Inc merged with BabyUniverse.

Parent Co said in court documents that its board had determined that it was in the best interest of the company to sell substantially all of its assets.

In a separate statement, it said nine of its subsidiaries also filed for bankruptcy protection.

"This action is an unfortunate but necessary and responsible step to preserve the company's value for our stakeholders in light of the ongoing challenging retail environment," Chief Executive Michael Wagner said.

U.S. holiday sales declined this year for the first time in at least four decades as consumers cut back spending as they contend with a year-long recession, job losses and tight credit.

Parent Co said it had hired Oppenheimer & Co. to explore strategic alternatives.

The company's brands include sites such as eToys.com, babyuniverse.com and PoshTots.com.

The company's shares have slumped some 70 percent in the last month alone, slashing its market value to just $5.6 million. (Reporting by Paritosh Bansal; Editing by Kim Coghill) (For more M&A news and our DealZone blog, go to www.reuters.com/deals)