The straight answer is as per F30, no employment law is being broken, especially as the post is being advertised and you are seemingly choosing not to apply.
The current organisation structure you describe seems hard to understand, but I think you are saying that you are the only person of 'management' grade in the office and a few people in the office report to you, but there are others in the office in two other teams who report to other managers who are not based in that office? Under the new structure, all people in the office will report to one 'office manager'.
I suggest you read up about 'matrix management' or matrix organisations'. They are often used when organisations have project outputs to deliver (to customers), using resources from different line departments that have a line management structure. A project manager is used who reports in at a higher and different level to the line managers, and he/she has responsibility (and budget accountability) for the project delivery, co-ordinating with the line managers who control the resources in the department, but are focused on the efficiency of running 'their bit'.
Your company seems to be doing something similar, such that the new office manager becomes a projects manager, accountable for the office and all team members, but co-ordinating with other managers outside the office who seem to have some need to call on the resources in the office (perhaps these are sales support teams?).
I'd jump at the chance of the wider role and responsibility, but it is your call - you know the politics and shinanigans of your organisation. You are likley to eventually end up as a 'manager without portfolio' otherwise.