Jan. 31 (Bloomberg) -- Apax Partners Worldwide LLP said it's considering a bid for Woolworths Group Plc, the operator of more than 800 U.K. stores, in a transaction analysts estimate may be worth as much as 847 million pounds ($1.6 billion).

The process is at ``a very early stage,'' and there is no certainty an offer for the London-based retailer will take place, Apax said today in a statement. Clare Sillars, a spokeswoman for Europe's largest buyout and venture capital firm, declined to elaborate. Woolworths stock gained 22 percent.

Woolworths is the latest U.K. retailer to attract takeover interest after New Look Group Plc, Debenhams Plc, Selfridges Plc and Hamleys Plc were bought in the last two years. Buyout firms, which typically use loans to finance two-thirds of their takeovers, are attracted by the chains' property and cash flow. Apax was part of the group that acquired New Look last year.

``With Woolworths there is that element of turnaround potential, and Apax will definitely be able to cash in on the property and the cash flow,'' said Grahame Exton, who oversees stocks worth the equivalent of $1.9 billion at Tilney Investment Management in Liverpool, England, not including Woolworths.

Shares of Woolworths climbed 9 pence to 49.5 pence in London, giving the company a market value of about 699 million pounds. About 192 million shares changed hands, more than 15 times the six-month daily average.

Clothes, Video Games

Apax may bid as much as 60 pence a share for Woolworths, whose stores sell goods from children's clothes to video games, said analysts such as Nick Bubb at Evolution Securities in London.

``That's a fair price and one at which Woolies management would be tempted,'' said Bubb, who raised his recommendation on Woolworths stock to ``buy'' from ``add'' before Apax's statement.

According to Numis Securities, a price in the ``mid-50s'' is ``a more realistic expectation unless a rival bidder emerges.''

Woolworths ``will give proper consideration to any proposal that is made,'' Chairman Gerald Corbett said in a statement.

The interest from Apax comes after Woolworths this month said annual profit will be about 10 percent less than analysts' estimates after same-store revenue was unchanged in December. Since then though, January trading has been ``positive,'' the company said in today's statement.

Chief Executive Trevor Bish-Jones spent 25 million pounds last year modernizing 50 Woolworths stores and has said he plans to revamp a further 75 in 2005 at a cost of 40 million pounds.

Divestment Talks

Woolworths, which was spun off from Kingfisher Plc in August 2001, is negotiating with potential buyers of some of its 21 Big W stores. Big W runs stores outside of city centers that stock as many as 55,000 different items including children's clothing, furniture and power tools, according to its Web site.

London-based Apax last year invested about 100 million pounds buying a 30 percent stake in New Look, the U.K.'s third- largest women's clothing retailer, which it owns jointly with Permira Advisers Ltd. and New Look's founder Tom Singh.

The company and Duke Street Capital Ltd. are due to share about 500 million pounds from selling Wickes Ltd., a U.K. supplier of building materials, to Travis Perkins Plc.

Buyout firms typically aim to boost a company's profit by changing managers or strategy before selling their holdings within five years to a new buyer or to investors in an initial stock sale. Buyout firms raise cash from institutional investors and use a combination of cash and loans to make purchases. The acquired company's cash flow pays down debt.

Apax's interest in Woolworths comes a day after the Sunday Times said Wal-Mart Stores Inc.'s Asda supermarket chain offered to buy U.K. department store chain Littlewoods from Frederick and David Barclay for as much as 500 million pounds. Other unidentified retailers have also made unsolicited bids and the Barclays have now opted to sell the business, the newspaper said, without saying where it obtained the information.

Bill Wertz, a spokesman for Bentonville, Arkansas-based Wal- Mart, said the company doesn't comment on speculation.

To contact the reporter on this story: Paul Jarvis in London at pjarvis@bloomberg.net.

Last Updated: January 31, 2005 11:43 EST