The stockbroking firm, which is led by maverick chief executive Terry Smith, is planning a bid between £400m and £500m in the event that the publisher of the Daily and Sunday Telegraph and The Spectator magazine is put up for sale by parent Hollinger International.
Collins Stewart has made an approach to Lazard, which is acting as financial adviser to Hollinger, according to a report in the Sunday Telegraph.
The broker is understood to have rallied a management team to run the company if its bid is successful.
In the last six months, Collins Stewart has bought two companies -- Northumbrian Water and holiday resort Center Parcs -- and sold them to institutional investors in flotations on the Aim stock market.
It is understood to be confident that its bid for the Telegraph Group would beat those from other newspaper proprietors such as Express Newspapers and the Daily Mail & General Trust, because it would not face a lengthy competition inquiry.
Hollinger is still deciding what to do with its UK newspaper group, after it was plunged into scandal when it was found to have made unofficial payments to board executives, including chief executive and chairman Lord Conrad Black, amounting to $32.15m (£19m).
Black, who received $7.2m, has since resigned as chief executive of the company.
Other potential bidders for the Telegraph Group include: a number of venture capitalist-backed consortia; former Mirror Group chief executive David Montgomery; outgoing Carlton chairman Michael Green; the Barclay brothers; and former Telegraph Group managing director Stephen Grabiner. Michael Ashcroft, the former Conservative Party treasurer, and US tycoon Nelson Peltz are also seen as potential bidders.
Spectator chairman Algy Cluff is understood to be preparing a management buyout of the magazine from Telegraph Group if Hollinger International is broken up.
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