Shares in Documedia leapt 70% to 9.99p this morning after the deal was announced.

Documedia will issue 55m new shares at 5p to acquire Tangent, valuing it at 2.75m, while London Digital will bring 500,000 in free cash to the table. London Digital made a 19,000 operating profit on sales of 2.5m last year, while Documedia made an operating loss of 117,000 on turnover of 5.3m.

The enlarged company will be renamed Tangent Communications plc, and will be headed by joint chief executives Nick and Tim Green, currently directors at London Digital.

Documedia chairman Warren Tayler will step down once the deal is finalised.

Nick Green described Documedia as a "hidden jewel". "Tim and I have looked at a number of opportunities over the past three years, and we've always had Documedia on our radar screen," he said.

"James Marsland [Documedia managing director] has created a fantastic collateral management solution and 15,000 people up and down the country are using their technology. We really like it and it's a great fit."

Green believes the combined business will offer more output variants than any other. "I'm not aware of any company in the UK that has more diversified services," he stated.

Michael Green, the former chairman of Carlton Communications and uncle of Nick and Tim Green, owned London Digital parent Tangent and will become a major shareholder in the new business.

The deal is subject to shareholder approval, and an Extraordinary General Meeting will be held after Documedia's AGM on 11 July.

Picture shows Nick (left) and Tim Green.

Story by Jo Francis