While the company did not identify the suitor, reports said Woolies was in discussions with Hilco, the retail turnaround specialist, about the sale of the high street business for just £1.
Woolies recently rejected a proposal from Iceland retail founder Malcolm Walker.
The retailer, which has been a presence on UK high streets for nearly 100 years, has more than 800 stores but has been battered by competition from supermarkets and internet retailers.
A retail deal would leave it with EUK, its entertainment wholesale division, and 2Entertain, the music and video publishing venture with the BBC.
Today's reports said the talks were likely to hinge on how much of Woolworths' debt Hilco will be prepared to take on. The company's net debt stood at £295m at the beginning of August.
And negotiations over responsibility for an estimated £100m pension fund deficit will also need to take place.
Hilco is best known in the UK for buying up the debt of Allders before placing the department store chain into administration.
It said its actions, including the provision of £15m of additional working capital, meant 30 Allders stores could be sold to other retailers, including Debenhams, Bhs and Primark, while retaining 3,500 jobs within the business.
Woolworths shares were down 12.1 per ent at 3.35p early today, valuing the group at about £49m.
Woolworths, which demerged from Kingfisher in 2001, has been struggling for years in the face of growing competition from supermarkets, online retailers and specialist players.
Its problems have been exacerbated in recent months by the rapid downturn in consumer spending, which has forced a string of retailers, including furniture retailers MFI and ScS Upholstery, into administration.
Woolworths posted a record first-half underlying pretax loss of £90.8m in September and scrapped its dividend.
Bank of Ireland division Burdale Financial and GMAC Commercial Finance will be key players in any Woolworths sale. Together they lent Woolworths £385m in January.
The pair appointed Deloitte to represent them in talks with Woolworths last month.
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