SEGRO, the industrial property group, is working on plans for a £300m rights issue - its second this year - to fund its proposed takeover of arch rival Brixton.
The company has asked bankers to begin work on a capital raising that would enable it to pay down £485m of Brixton's debt, which matures next year.
City sources said Segro had still not made a firm decision and cautioned that if it did go ahead with an offer it could still choose to finance the deal using its own resources, or bring in a private-equity partner.
Property experts said, however, that a capital raising was the likely option and Segro's advisers, JP Morgan Cazenove and UBS, have been instructed to carry out preparatory work.
Observers have been fearful that bidding for Brixton could bankrupt Segro. But Ian Coull, the chief executive, has insisted it will not do anything that puts its own balance sheet at risk.
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The combined group would be one of the largest industrial companies in Europe, with property assets of £5.5 billion.
Brixton, which has been looking at refinancing its debts and securing a covenant waiver from bondholders, has also been talking to other potential bidders.