The boards of three foundation trusts in London have agreed a strategic outline case for a merger that would create the largest trust in England.

King’s College Hospital, Guy’s and St Thomas’ and South London and Maudsley have agreed the case for forming an organisation with a turnover of more than £2bn.

The new organisation would be nearly twice the size of Barts Health Trust - which with a turnover of £1.1bn is the biggest in the NHS.

The merger of a mental health trust with two hospitals would be unique.

A full business case will be presented to the three trust boards and the board of King’s College London, their university partner in an academic health science centre, early in 2013.

The strategic outline case estimates the earliest a merger could take place would be late 2014.

No foundation trusts have yet merged and an application would have to be approved by Office of Fair Trading, which could refer it on to the Competition Commission.

The document said: “Estimates suggest three to five per cent savings in non-clinical support functions alone could be achieved in the new organisation” and that “a single organisation could make better use of our combined assets (£1.3bn across the three trusts) to release funds for investment in new models of healthcare”.

The trusts already work together with King’s College London as part of academic health science centre King’s Health Partners, as well as collaborating on research and providing services as part of “clinical academic groups”.

The new organisation cannot become a single legal entity with King’s College London but the intention is to further strengthen the ties between the trusts and the university.

The new organisation would operate as a single foundation trust and its chief executive would sit on the board of King’s Health Partners.

The trusts believe the combination of secondary, tertiary, mental health and community services would make it unique in the NHS.

But the document stressed: “We have been clear from the outset that this undertaking would be unacceptable – and would fail – if it resulted in a remote, centralised organisation which attempted to replicate conventional NHS trust governance, management and service arrangements at this scale. It would have to operate in a very different way to be effective.”

It also clarified that the two A&Es and maternity units would remain on their current sites.

The news comes one month after South London and Maudsley chief executive Stuart Bell announced he was leaving, after 14 years, to lead a trust in Oxfordshire.