Private equity groups have been looking at splitting off the Big W discount stores from the big supermarket operator Woolworths.
A Bloomberg report says KKR & Co (Kohlberg Kravis Roberts) and TPG Capital have made preliminary approaches to Woolworths.
According to Fairfax Media, the Big W chain could be valued at $1.5 billion.
KKR was reported in June to be looking at a way to buy all of Woolworths. Such a deal would be one of the biggest private equity buys in Australian history.
Woolworths is hunting for a new CEO and a new direction after reporting stalled sales growth and less than impressive profits.
Its main rival, Coles, is still maintaining a good growth curve. September quarter food and liquor sales at Coles supermarkets rose 4.7% to $7.631 billion.
And Masters, the Woolworths home improvement business, is losing money. Losses were running at $224.7 million in the 2015 financial year. Total losses since starting the business are about $600 million.
Big W, with 184 stores, competes against Kmart and Target, both run by Wesfarmers, the owner of Coles.