Woolworths is understood to be in talks to sell its high street business to specialist distressed fund Hilco for £1.

A deal would hinge on how much of Woolworths’ debt Hilco is willing to take on. According to The Times, Hilco does not want to take on the£100 million pension fund deficit.

Any deal will also require the approval of the pick and mix retailer’s banking syndicate, which recently appointed restructuring advisers Deloitte.

In a statement this morning, the Woolworths’ board confirmed that it is in preliminary discussions regarding a possible offer for the retail business. However, it added that “there can be no assurance that any offer will be forthcoming”.

It is widely believed that a demerger of Woolworths’ underperforming retail arm and its media and distribution business – 2entertain, the DVD publisher, and EUK, a specialist distribution business – would be the best outcome for the struggling business.

One possible bidder for 2entertain is BBC Worldwide, which already owns 60 per cent of the joint venture.

Woolworths has been the subject of bid speculation for some months, with investor Baugur and Iceland founder Malcolm Walker offering£50 million in August. The Woolworths board appointed chief executive Steve Johnson earlier this year to turn around the ailing business.

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