MALVERN-based Festival Housing Group has announced it has had preliminary discussions over a possible merger with the Heart of England Housing Group.

Festival, which owns more than 8,000 rented homes through Elgar and Spa Housing Associations in Worcestershire and Herefordshire, is talking to Stratford-based Heart of England Housing Group about the benefits of a possible link.

Heart of England Housing Group has 5,600 properties through the South Warwickshire Housing Association.

The companies have agreed three key principles that will guide future discussions - firstly that any merger would be built on the basis of an equal partnership.

All three founding housing associations would also retain their local independence and identity within the group structure and the benefits of any merger would exceed the potential of either organisation continuing independently.

"Initial discussions have confirmed the boards of both parent companies have clear and complementary objectives about the positive benefits of forming partnerships with like-minded organisations," said Michael Herring, vice chairman of Festival Housing Group.

"There is, however, a long way to go before any merger can be approved."

A joint working group will now analyse the long-term benefits for customers and other stakeholders of any merger.

There will then be a consultation exercise from which the views of staff, tenants and other stakeholders can be evaluated.