A merger worth £40million between distribution firms DX Group and John Menzies is under threat as police investigate DX’s Exchange arm.

Following a tip-off, City of London Police are looking into an undisclosed allegation about the specialist delivery service for lawyers and legal firms.

A police spokesman said the probe was being run by its economic crime directorate.

Probe: City of London Police are looking into an allegation about DX Group’s specialist delivery service for lawyers and legal firms

DX, which charges members £250 to join and an annual payment for the cost of the legal document delivery service, said it was ‘co-operating fully’ with the investigation.

It added: ‘An allegation has been made against the company which has resulted in the commencement of a preliminary investigation centred on DX Exchange operations.

‘The investigation is at a very early stage.’

The logistics firm is in the midst of a £40million merger with the distribution arm of John Menzies, which last night said it was considering its position.

It is the latest setback for the deal, which had faced strong opposition from Gatemore Capital Management, which has a 21 per cent stake in DX.

The activist investor originally said the deal was like ‘tying two rocks together to see if they float,’ but made a U-turn on Monday after the terms were tweaked.

Under the original plan, DX was to pay £60million in cash and take on the pension liability while Menzies held 75 per cent of the shares.

But the new deal will see DX acquire Menzies Distribution for £40million in cash, with Menzies shareholders owning around 65 per cent of shares.

In a statement, Menzies said: ‘The board notes the announcement made by DX. The board is considering its position and will make a further announcement as and when appropriate.’

DX shares have been suspended since the proposed tie-up was announced in March.