UPDATE 2-Bang & Olufsen enrolls partners for China growth
* B&O says to issue stock to new partners
* Teams with Sparkle Roll and A CAPITAL
* Directed share issue to raise 177 mln DKK
* B&O aims to grow up to 10-fold in China (Adds details on growth plans, A CAPITAL chairman comment)
By Simon Meads and John Acher
LONDON/COPENHAGEN, July 19 (Reuters) - Electronics maker Bang & Olufsen is taking on two little-known strategic investors as it looks to increase sales tenfold in China and catch up luxury rivals in the world's largest market.
The Danish company, struggling to recapture its pre-eminence in upmarket stereos and televisions, follows a hoard of luxury brands that have pinned their hopes on China's growing middle classes to offset weak demand in Europe and the United States.
Bang & Olufsen reported worse-than-expected results in April for its financial third quarter as sales in Europe fell and product launches were delayed.
Bang & Olufsen said on Thursday it will raise 177 million crowns ($29.2 million) in a share issue to two new partners, privately owned Sparkle Roll Holdings Limited and A CAPITAL, a private equity fund founded two years ago which invests in companies that need to grow in China.
"The strategic partnership will be important for accelerating our growth in China," Bang & Olufsen Chief Executive Tue Mantoni said.
Shares in Bang & Olufsen rose 10 percent to 66.50 crowns by 1342 GMT, valuing the company at 2.2 billion crowns but far off its peak in 2007 when it was worth about six times as much.
The Copenhagen bourse's benchmark index was up 1.2 percent.
The deal was put together by A CAPITAL, which approached Bang & Olufsen late last year with a proposal to enlist a local company to help the business grow in China, said the firm's Chairman André Loesekrug-Pietri.
"We saw that they had only a couple of percentage points of their business in China while all their peers and luxury groups do today between 15 and 20 percent of their business in China. There was obvious growth potential," said Loesekrug-Pietri.
Sparkle Roll Holdings is wholly owned by Qi Jianhong and it owns 28 percent of Hong Kong-listed Sparkle Roll Group Ltd. , which is a distributor of luxury cars including Bentley, Rolls Royce and Lamborghini, as well as jewellery, watches and fine wines in China.
Bang & Olufsen and its partners plan to increase sales by taking top-of-the-range audio and video products to consumers in China's biggest and most affluent cities, and more affordably-priced goods to people in the smaller, so-called tier 3 cities.
The Danish group said it would issue new stock equal to an 8.35 percent increase in the share capital at market price.
Sparkle Roll will take a 6.12 percent of shares after the capital increase and A CAPITAL a 1.59 percent stake.
The plans envisage A CAPITAL'S Loesekrug-Pietri taking a seat on Bang & Olufsen's board after the company's upcoming annual meeting with shareholders.
The roughly 3.03 million new shares will be issued to Sparkle Roll and A CAPITAL at 60.22 crowns per share which is the average closing price over the past 30 days, and are expected to be registered by Sept. 30, the company said. ($1 = 6.0652 Danish crowns) (Editing by Erica Billingham and David Cowell)
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