The combined group will be rebranded as Premier Miton Group plc with the deal expected to be completed by the end of year, subject to shareholder approval.

Following the merger, Miton shareholders will own approximately 33 per cent of the combined group which will continue to be traded on AIM. Premier is a multi-asset specialist while Miton offers a range of active funds.

Both companies said today that there was a “compelling strategic and financial rationale” for the deal to create a “diversified active UK asset manager.”

The combined business will have a wider product range and bigger scale, say the firms. A much large asset base of £11.5 billion will also help the merged firm compete better with bigger rivals.

Funds will be balanced between outcome-based multi-asset strategies and active single strategies.

Based on the Pridham Report published in February, the combined business would have been the 5th largest in terms of UK net retail sales in 2018, say the firms.

There has been no word on redundancies and cost reductions in detail but the firms expect to make annual savings of approximately £7m per annum from the “alignment of operating platforms” within three years of the merger.

The board of the combined group will be drawn from both businesses. Following completion Mike Vogel, chairman of Premier, will be chairman of the combined group. Mike O'Shea, CEO of Premier, will be CEO. Piers Harrison, COO of Miton, will be CFO of the combined group.

Mike O'Shea, CEO of Premier said: "This merger will bring together two complementary and culturally-aligned businesses. The combined group will create a company with greater scale and financial strength to invest for future growth, with broader and deeper investment capabilities, enhanced distribution and a more efficient operating platform."

David Barron, CEO of Miton, said: "Miton's expertise in actively managed, differentiated high conviction funds is a very strong complement to Premier's leading position in multi-asset strategies. With limited overlap between the two businesses, this merger will result in the ability to offer our clients a broader and more compelling range of investment solutions."

Under the terms of the merger, holders of Miton Shares will receive 0.30186 Premier Shares in exchange for each Miton Share. Under the terms of the merger, Miton has declared a special dividend of 4.9 pence per Miton Share which is conditional on the merger taking place.

The merger will depend on a vote of shareholders to accept the offer.

Ryan Hughes, head of active portfolios at AJ Bell, said: “News of the merger between Premier and Miton shows the pace of consolidation in the UK asset management space continues unabated as more active managers look to scale up to take on the challenge of passive investing and narrower distribution.

"The two businesses look a very good fit with complementary fund ranges that combine Premier’s key competence in multi asset investing with Miton’s focus on single strategy funds. There is little overlap in the fund ranges although some prospect of consolidation in UK equity income, multi asset and infrastructure does exist and therefore we may see some fund mergers over the next 12 months.”

• 9.45 am Editor's Note: addition information and comment added.