SHARES in Woolworths leapt by more than 20 per cent yesterday after a potential bidder confirmed its interest in a takeover.

Private equity firm Apax Partners, which helped fund the takeover of New Look last year, said it was at an early stage of considering a move - thought to be worth about £700m.

If it decides to proceed, Apax said it would approach the board of Woolworths to gain its support.

The move follows a tough Christmas season for the retailer, which recently described its performance as disappointing after sales of toys and blockbuster DVDs failed to meet expectations.

It has been losing out to rivals such as Tesco as supermarkets gain a larger market share of non-food items.

A decline in shares was reversed when the stock soared to its highest level in more than two years.

Apax said: "Considerations are at a very early stage and there can be no certainty at all that any offer will ultimately be forthcoming.''

The firm said a further announcement would be made when appropriate.

Apax was one of the two private equity firms which recently sold DIY retail chain Wickes to builders' merchant Travis Perkins for £950m.

The deal is likely to be a leveraged buyout, where Apax believes the Woolies operation will generate enough cash for it to be able to pay debt on the deal quickly.

The exact structure of the deal is still to be detailed.

The private equity group has investments in more than 335 companies around the world, with many of its deals in the form of management buyouts.

Stockbroker Seymour Pierce is expecting Woolworths to post pre-tax profits of £68m this financial year, against £66.8m last time.