British music and books retailer HMV Group Plc is auctioning its Japanese business, with buyout firms among the bidders, sources familiar with the matter said on Friday.

The bidding has started high, at about 10 times core earnings. Japanese bank group Shinsei Bank Ltd. is conducting the sales process, the sources said. A Shinsei spokesman declined to comment.

HMV runs Waterstone's bookstores as well as music shops under its own name and has recently started a three-year turnaround plan.

The group, which issued a profit warning in March, is battling cut-price competition from supermarkets such as Tesco Plc and online retailers such as Amazon , as well as a decline in physical music and DVD markets as downloading gains in popularity.

The group has said the market was forecasting a profit for the year to the end of April at about £48 million ($95.62 million).

HMV, which has around 330 Waterstone's and 235 HMV shops in Britain, has said it plans to sell 20 to 30 Waterstone's stores and a small number of underperforming HMV stores.

Its 63 Asian HMV stores, including 57 in Japan, made £275.5 million of sales in 2005/2006 and £8.6 million of operational profit before exceptional items.

HMV said in its interim results statement for 2006/2007 that HMV like-for-like sales in Asia were down 1.4%, reflecting weak music and DVD markets in Japan.

An HMV spokesman declined to comment on any news of an auction but said HMV is reviewing a number of options for its Japanese business including disposal or keeping it as part of the group.

HMV expects to update the market on its review in June, when it is scheduled to release its full year results.