London Merchant up on merger hope

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The Independent Online

London Merchant Securities shares jumped 29.75p to 270p yesterday after the property developer revealed that it is in merger talks.

Although LMS declined to name the company with which it may merge, it is understood to be rival property group Great Portland Estates. Any tie-up could value LMS at about £1bn, but the company stressed that negotiations are at "a very preliminary stage and no merger terms have been proposed by either side".

The company was forced to make a statement after a report in the weekend press suggested that a bid from private equity was imminent. LMS said it was "not aware of any such offer".

The admission from LMS comes less than a week after another property group, Grainger Trust, admitted that it too had received a bid. That is believed to have come from Regis, a little-known, Essex-based residential property company.

LMS provides office, retail and leisure space worth £1.1bn. It is controlled by the family of its chief executive, Robbie Rayne. It recently demerged its venture capital arm, Leo Capital, in readiness to convert to a tax-efficient real estate investment trust in 2007.

In an update on trading in the six months to the end of September, LMS also told investors that the business continued to perform well.

Lettings, acquisitions and disposals were all going well, LMS said. The group has development projects worth £250m under way. Others in the pipeline could be worth a further £1bn.

The group also reassured shareholders that income from residential lettings looks set to grow significantly over the next two or three years.

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