Private equity firm Advent International is reported to be working with Hellman & Friedman and Mid Europa Partners on a bid for Pepco Group.
A takeover could value Pepco at more than €4.5bn (£3.8bn), Sky News reported.
Steinhoff International is looking to sell Pepco, which includes retailer Poundland. Advent offloaded Poundland to Warburg Pincus for £200m in 2010.
It is not certain that the consortium will make a formal offer but it is understood to be serious about its interest.
Sky News sources said the group was being advised by Rothschild on its prospective offer.
The Advent-led consortium would provide an alternative to a float which Steinhoff has been exploring for months.
Steinhoff is reportedly looking for between £3.5bn and £4bn from the flotation or sale of Pepco, which has a total of 2,700 stores.
Pepco is currently run by the former Asda chief executive Andy Bond. The group has said it plans to open up to 300 plans annually, predominantly under the Pepco brand.
The retailer changed its name from Pepkor Europe and last autumn Bond said: “Our new name is more distinctive and clearly links the group to its largest operating company and source of future growth”.
Sky News previously reported that Partners Group, another private equity firm, is also reportedly considering a bid for Pepco.
Advent International declined to comment. Pepco and Mid Europa Partners were contacted for comment.