The company is looking to double its British stores to more than 1,000 and expand in Europe ahead of the potential London listing according to Reuters, which cited two sources familiar with the situation.
Warburg picked up a 76 per cent stake in the business as part of a £200m deal in 2010, with chief executive Jim McCarthy holding the remaining share.
The FT reported in May that strong demand for a majority stake in rival value chain B&M in 2012 suggested an auction was more likely than an IPO.
Poundland could have its third private equity owner in a row if the auction goes ahead and it is bought by a buyout firm.
Advent International bought the group for £50m in 2002 before selling it to Warburg eight years later.
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