Australian retailer Woolworths has applied to New Zealand's competition watchdog to take over the country's largest listed retailer The Warehouse.

Woolworths chief executive Michael Luscombe said the Australian-based supermarket and retail chain had not decided whether to make a full takeover bid for the 85-store discount retailer.

"This application allows us to continue to evaluate all options in relation to our potential entry into the general merchandise sector in New Zealand," Luscombe said in a statement.

He said he did not believe there were any competition issues which would prevent Woolworths taking over The Warehouse.

Woolworths, which is also a major supermarket operator in New Zealand, last year took a 10 percent stake in The Warehouse, which has a market value of 2.2 billion dollars (1.5 billion US).

Woolworths' main rival in the New Zealand supermarket business, Foodstuffs, also took a 10 percent stake in The Warehouse and applied for permission from New Zealand's Commerce Commission for any takeover bid.

The main obstacle to takeover ambitions by either Woolworths or Foodstuffs is The Warehouse's founder Stephen Tindall, who through his family and a foundation controls 51 percent of the company.

He has been reported to be working on a takeover bid with Foodstuffs and Private Equity Partners (PEP). An attempt by Tindall and PEP late last year to privatise the chain foundered when Woolworths took its 10 percent stake.

The supermarket chains interest in The Warehouse was sparked last year when it decided to expand 'from general merchandise into groceries.

Shares in The Warehouse rose five cents to close at 7.04 dollars on the New Zealand Stock Exchange after reaching an high of 7.20 during the day.