Alliance Trust has confirmed it is in talks over a £5bn merger with RIT Capital Partners.
The investment group says it has received an informal approach from RIT Capital, an investment trust chaired by Lord Rothschild, but added no further details.
The combined firms would be worth around £5bn, with Alliance valued at £2.6bn and RIT at £2.4bn, making it the largest investment trust in the UK.
The move saw an initial boost to Alliance Trust, with shares in the trust rising 3.6 per cent in early trading to 527p at time of publishing. The jump is particularly significant considering the shares have risen 0.68 per cent since June last year.
A statement from RIT says that the talks are at a “very preliminary stage of consideration”, adding that there is “no certainty” an offer for Alliance Trust will be made.
Dundee-based Alliance Trust says it will now speak to its shareholders about the proposals.
Last year Alliance Trust came under fire from investors over its leadership. Activist hedge fund Elliott Advisors, which owned 16 per cent of the firm, called for new leadership in spring 2015.
The campaign led to the exit of chairwoman Karin Forseke and chief executive Katherine Garrett-Cox.
An Alliance Trust statement says: “No detailed terms have been provided by RIT with regard to the proposal or in respect of the Company’s two principal operating subsidiaries. The board of Alliance Trust will incorporate any formal merger proposal received from RIT into its strategic review, alongside the other options being considered.
“There can be no certainty that any transaction will result from the strategic review. In the interim, shareholders are strongly advised to take no action and to await the outcome of the board’s strategic review.”
Mark Dampier, head of investment research at Hargreaves Lansdown, says: “A merger of RIT and Alliance Trust would create the largest investment trust in the UK and increase liquidity of both trusts dramatically. However both trusts are widely different in their objectives and philosophy. The politics of Alliance Trust’s Scottish base, savings scheme and platform will make this a potentially complex merger.”
According to the Takeover Code RIT must announce its intention, or not, to make an offer by 27 June 2016.