Listed firm Ince’s takeover of corporate adviser and stockbroker Arden has been thrown into doubt after the London Stock Exchange rejected Arden’s application for nominated adviser status in the event the deal goes ahead.

The parties agreed a £10m deal last October following an offer by Ince to buy the entire share capital of Arden, whose shareholders voted overwhelmingly to approve the acquisition in January.

A condition of the takeover was that the London Stock Exchange (LSE) had to determine that Arden remained eligible to act as a nominated adviser in accordance with the Alternative Investment Market rules following the change of control.

The stock exchange yesterday rejected Arden’s application for approval of its nominated adviser status if the takeover goes ahead, putting the deal in jeopardy and causing Arden’s shares to drop by nearly 20% this morning.

Both companies said in a statement to the stock exchange that the LSE had ‘considered whether Ince, as the new controller of Arden, satisfies the eligibility criteria for nominated adviser status in its own right’.

The LSE, which ‘consistently informed Arden that … there was a significant risk to Arden’s continued nominated adviser status should the change of control occur’, decided not to approve Arden’s application yesterday.

Ince and Arden said: ‘Accordingly, Arden will not remain eligible to act as a nominated adviser in accordance with the AIM rules for nominated advisers in the event of the change of control. The board of Arden has entered into discussions with the board of Ince regarding the implications of London Stock Exchange’s decision and will provide a further update to shareholders as soon as practicable.’

Arden’s shares fell by 19.4% to 14.5p following the news while Ince’s shares were unchanged at 28p.