Alliance Trust has seen a three per cent rise in its market value after revealing that it has appointed advisers to carry out a new strategic review, coinciding with the informal merger proposal from rival RIT Capital Partners.

RIT, the investment fund of 80-year-old City grandee Lord Rothschild, yesterday stressed that its approach to Alliance, which the Dundee-based company confirmed on Monday, was at a “very preliminary” stage.

But Alliance, chaired since January by Lord Smith of Kelvin, issued a detailed statement revealing that advisers Canaccord Genuity had been “recently” appointed to advise on “a broad range of potential courses of action which the company might choose to take for the benefit of shareholders”.

When unveiling final results in March Lord Smith said the company’s restructuring, following an annual strategy review by the board, was complete.

Yesterday the board said the new strategic review would take some months to complete and the “unsolicited approach” by RIT, with an informal proposal for a merger, had included no plans for Alliance’s savings and investment subsidiaries.

Alliance Trust Savings is the main employer of the company’s 250 workforce at its Dundee headquarters. The SNP has already said it will be monitoring developments to protect the city’s important financial base.

Alliance said it would “incorporate any formal merger proposal received from RIT into its strategic review, alongside the other options being considered”, but there was “no certainty that any transaction would result” from the review. It advised shareholders to take no action. RIT meanwhile has until June 27 under takeover rule to make a formal offer if it intends to do so.

Alliance shares rose 17p to 525p, valuing it at £2.75billion, while RIT lost two per cent, valuing it at £2.45bn.

Analysts saw both benefits and pitfalls in a marriage with RIT.

Mark Dampier, head of investment research at Hargreaves Lansdown, said: “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.”

Mr Dampier said the Alliance subsidiaries “could boost performance of the trust over time if they perform well, but it does add a layer of complexity”. But he said that despite recent improvements Alliance’s performance under managers appointed in 2014 had been lacklustre “We would like to see more evidence the new team, and the changes they’ve implemented, can improve long-term performance before becoming more positive.”

Lord Rothschild’s trust is trading at a premium to its asset value of almost eight per cent, while Alliance Trust shares were on Tuesday at a 10 per cent discount to asset value.

Simon Elliott at Winterflood Securities said: “In our opinion the opportunity to merge with RIT Capital Partners is one the board of Alliance Trust should take seriously.

“Although no doubt an array of alternative options will be presented, this one has the advantage of potentially being able to accommodate the subsidiary businesses as well as offering a proven investment solution. We believe a merger has much to commend it.”