Bain, Advantage in running for Denon maker: sources

By Alison Tudor and Mayumi Negishi

HONG KONG/TOKYO (Reuters) - Private equity firms Bain Capital and Advantage Partners are among companies bidding for Japan's D&M Holdings Inc 6735.T, the maker of Denon and Marantz audio equipment, sources familiar with the matter said.

D&M, whose main shareholders are U.S. buyout fund Ripplewood and Dutch electronics maker Philips Electronics (PHG.AS), has a market value of about $277 million.

Also in the running is a retailer of electronic goods from outside Japan and Merrill Lynch Global Private Equity, the private equity investment arm of Merrill Lynch MER.N, the sources said.

A spokeswoman for D&M declined to comment.

RHJ International SA (RHJI.BR), Ripplewood's holding company, is auctioning its roughly 49 percent stake in D&M.

The winner of the auction is expected to launch an offer for the whole company, during which Philips, the second-biggest shareholder, is expected to sell its 12 percent stake, the sources said.

The company has grown on a string of acquisitions, such as that of Philips Sound Solutions from Philips Electronics last year. It also makes McIntosh audio equipment.

But D&M has been branching out from its premium audio business for consumers, developing new sound systems for cars. It is also targeting corporate business and has been seeking to expand sales in Asia, eastern Europe and South America.

In August, it bought unlisted British broadcasting equipment maker Calrec Audio Ltd., which supplies digital mixing equipment to the BBC and CBS, as it seeks corporate clients.

D&M forecasts annual sales to grow 8 percent to 108.5 billion yen and 11 percent operating profit growth to 6.4 billion yen in the year ended in March, helped by acquisitions, cost cuts and demand from flat TV owners for high-end speakers.

But D&M saw its operating profit fall 13 percent to 3.8 billion yen in the nine months ended December, hit by costs to develop next-generation DVD players using Bluray technology and one-off accounting costs from its acquisition of Calrec.

Advantage Partners, RHJ International and Merrill Lynch declined to comment. Bain Capital did not return calls.

($1=101.24 Yen)

(Additional reporting by Wakako Sato and Michael Flaherty; Editing by Rodney Joyce)