By Clare Baldwin and Dhanya Skariachan

NEW YORK(Reuters) - Restoration Hardware plans toraise as much as $300 million in an initial public offeringthat would allow its private equity backers to cash in on partof their investment in the U.S. furniture retailer, a sourcefamiliar with the situation told Reuters.

Bank of America Merrill Lynch and Goldman Sachs would leadthe IPO, which is planned for the first half of next year, thesource said.

It is expected to raise between $100 million and $300million and give Restoration Hardware a market capitalizationof around $1 billion, the source said.

Restoration Hardware sells furniture, bath linens, lightingfixtures and other items for homes at its retail stores, onlineand through catalogs. The IPO plan comes as home goods recoverafter the recession.

The shares are expected to trade on the New York StockExchange, the source said.

Four hundred fifty-eight companies have filed to go publicin the U.S. since 2009, according to Thomson Reuters data.Private equity-owned companies are among the biggest.

Hospital operator HCA Inc hopes to raise up to $4.6 billionand Toys R Us Inc hopes to raise about $800 million. NielsenHoldings BV, best known for viewership ratings which oftendetermine the fate of TV shows, hopes to raise $2.01 billion.

This year, private equity-backed IPOs debuting in theUnited States have posted average losses of 0.7 percentcompared with all IPOs, which have posted average gains of 4.42percent, according to the data.

Restoration Hardware's plans for an IPO are stillpreliminary and could change. The source declined to be namedbecause preparations for the IPO remain private. Spokespeoplefor Bank of America Merrill Lynch and Goldman Sachs declined tocomment. A spokeswoman for Restoration Hardware also declinedcomment.

Sales at home goods retailers crumbled during the U.S.recession and housing downturn as consumers tried to save moneyby buying fewer things. They are beginning to buy more thingsafter a long hiatus.

But the economy is recovering in fits and starts andconsumer demand is uncertain. Some industry watchers also worrythat the expiration of a U.S. tax credit for home buyers couldslow recent sales growth.

ATTRACTING CUSTOMERS

Private equity firms Catterton Partners and Tower ThreePartners LLC, along with Restoration Hardware Chief ExecutiveOfficer Gary Friedman, bought a controlling equity stake inRestoration Hardware in a merger agreement approved byshareholders in June 2008.

Restoration Hardware had agreed in November 2007 to betaken private for $6.70 per share, or about $267 million, in atransaction led by Catterton and Friedman, who remains CEO.

Two months later, it reduced the price to $4.50 per share,valuing the company at roughly $175 million, after marketconditions deteriorated. Sears Holdings Corp had alsobid for the company.

At the time of closing, private equity firm Tower ThreePartners LLC made an equity investment in Restoration. Thisleft Catterton and Tower Three with a controlling stake, thecompany said at the time. Tower Three has invested $115 millionin Restoration, according to the firm's website.

Before it was taken private, Restoration Hardware waspublicly traded on the Nasdaq under the ticker symbol "RSTO."

In its last fiscal year before going private, which endedon Feb. 2, 2008, Restoration lost $51.9 million on net revenueof $722.2 million. The company had lost money in seven of itsnine latest fiscal years at the time.

Restoration Hardware, with its latest collection includinghand-crafted oak tables and linen-upholstered chairs in neutralhues, looks to be targeting a higher-end customer.

At the same time, much of chain retailers' sales strengthhas come from cutting prices and offering more products.

Pier 1 has been selling more cheaper, decorative items likeend-tables and side-tables rather than bulky couches andarmoires. The store is also offering more kinds of products.

Williams-Sonoma Inc , which operates Pottery Barnand West Elm, slashed prices on some items despite worries thatthe move might tarnish its image as a high-end retailer.

Even furniture retailer Ethan Allen Interiors Inc,which stuck with full prices throughout most of the downturn,offered more promotions to avoid losing more market share.

Most of these retailers changed their sales strategiesafter Linens 'N Things, once the No. 2 U.S. homegoods chain, and smaller players like Gottschalks became casualties of the downturn. (Reporting by Clare Baldwin, Dhanya Skariachan and JonathanStempel. Editing by Gerald E. McCormick and Robert MacMillan)