Alliance Trust’s share price surged on the London Stock Exchange in response to a £5 billion merger proposal for the Dundee-based financial services group.
From Friday’s closing price of 508 pence, trading opened on Tuesday after Monday’s May Bank Holiday with Alliance Trust up 18.33p (3.6%) at 526.33p on news of RIT Capital Partners’ approach.
They reached a high of 528p before closing on Tuesday at 521p, up 12.5p (2.46%) on the day.
Shares in RIT Capital Partners of London, who contacted Alliance Trust with the merger proposal, fell by 40p (2.47%) to 1,579p.
RIT is chaired by British financier Lord Jacob Rothschild and has net assets of £2.4bn. The Net Asset Value of Alliance Trust is higher at £2.65bn.
RIT said discussions over a £5 billion merger with Alliance Trust are at a “preliminary stage”.
“The possibility of combining the two companies for the benefit of both sets of shareholders is at a very preliminary stage of consideration,” it stated.
“Further analysis and discussion will determine whether such an outcome is indeed in the best interests of shareholders and can be achieved.”
Lord Rothschild and other members of the Rothschild family own 21% of RIT’s shares.
Alliance Trust has recently been troubled by shareholder unrest.
It said the offer would be considered as part of a strategic review that has been ongoing since Lord Smith of Kelvin became chairman in January.
Cannacord Genuity and other specialist advisers have been engaged to advise the company on its future direction.
Alliance Trust said RIT had not provided details of its proposal.
Its statement added: “The board of Alliance Trust will incorporate any formal merger proposal received from RIT into its strategic review, alongside other options being considered.”
Alliance Trust stressed there can be no certainty that any transaction will result from the strategic review.
It advised shareholders in the interim to take no action and to await the outcome of the strategic review.
