Shares in the Dundee-based Alliance Trust rose by over 3 per cent this morning following the news of a takeover approach by Jacob Rothschild’s RIT Capital Partners.

RIT is chaired by Lord Rothschild whose family owns 21 per cent of the firm.

In early trading this morning, Alliance Trust shares were up 3.6 per cent, or 18.5p higher at 527.0p.

But the move has heightened fears of job losses at the 128-year old Trust which has been shedding jobs in recent weeks and has been at the centre of criticism from activist shareholders who accuse it of under-performing and over-paying its executives.

RIT Capital said today that the discussions over a merger are at a “preliminary stage”.

It added: “The possibility of combining the two companies for the benefit of both sets of shareholders is at a very preliminary stage of consideration.

“Further analysis and discussion will determine whether such an outcome is indeed in the best interests of shareholders and can be achieved.”

If a merger took place the two investment trusts would be worth £5 billion and would manage more than £5bn of savers’ cash. Alliance manages £2.7bn of assets while RIT Capital Partners manages about £2.4bn.

Alliance Trust said the Rothschild 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.

A spokesperson said: “The company wishes to thoroughly explore all options available to it for the long-term future benefit of shareholders and therefore expects that the strategic review outcome may not be determined for some months.

“The board of Alliance Trust notes recent press speculation relating to an unsolicited approach received by the board and confirms that RIT Capital Partners plc has approached Alliance Trust with an informal proposal for a merger of the two companies.

“However, 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.”