Woolworths said it had held "exploratory discussions" with Bhs owner Philip Green but had decided not to go ahead.

However, speaking to the Reuters news agency, Mr Green criticised Woolworths' approach and refused to rule out the possibility of a hostile takeover bid.

Shares in Woolworths closed down 5.6% at 45.75p on Friday.

Hostile bid?

Woolworths shares had risen during early trade on rumours that a deal was about to be struck.

But these were quickly quashed by a statement from Woolworths.

"After due consideration of the potential benefits of a merger, the board does not believe that such a merger, with its attendant risks and uncertainties, would be in the best interests of shareholders," the company said.

The merger talks are reported to have taken place over the past few weeks.

"The talks broke down because they wouldn't give us any financial information," Mr Green told Reuters.

"I'm not sure why they ever phoned us."

When asked if he would be taking any further action he said: "I can't rule anything in or out."

Philip Green is one of the most high profile figures in the UK retail industry.

He bought BHS for £250m two years ago and is widely credited with reviving its fortunes, increasing annual profits from £12m to £92m.

Lonely struggle

Woolworths said its priority was now to concentrate on pursuing its recovery plan.

The firm has had a tough time since it split from parent company Kingfisher last August.

Trading over the Christmas period was poor, and the company had to get rid of a lot of excess stock.

In May, Woolworths told investors it was still struggling to increase business, with sales at its city centre stores especially badly hit.