Kerry-based groups Fexco and CNG have signed heads of agreement under which Fexco will acquire CNG's loss-making business-to-consumer unit, Places to Stay, an online hotel booker.

While a final deal is not expected for some weeks, Fexco was confirmed as preferred bidder on Friday after the initial results from due diligence examination into the Places to Stay unit. The price is not known.

An unquantified number of jobs from the unit's 54 staff in Kenmare will be lost if the deal goes ahead, although a certain number are likely to transfer to Fexco. Staff were told last Friday about the talks.

It is understood that CNG's founder and former chief executive Finbarr Power is not party to the talks with Fexco.

Mr Power's departure from CNG last June was prompted by his suggestion that he might bid for the Places to Stay business.

However, it was unclear last night whether he made a bid.

Discussions on the proposed deal with Fexco are continuing in parallel with separate talks with the unnamed suitor that made an unsolicited bid last month for the entire CNG business.

While both deals are still subject to negotiation, a possible sequence of events is that the suitor would acquire the units remaining in CNG after Fexco buys Places to Stay.

The fact that these talks continue after the selection of Fexco as preferred bidder suggests that the suitor is happy to proceed on this basis.

In addition, the suitor entered the frame at a time when Places to Stay was already on the market.

This led some sources to speculate that the suitor never contemplated buying Places to Stay as part of a takeover of the wider CNG business.

Spokesmen for CNG and Fexco confirmed yesterday that the talks were underway.

"CNG is in discussions with Fexco," said CNG's spokesman.

Fexco's spokesman said: "There has been a change in the situation. The company is confirming that Fexco heads of agreement with CNG in respect of its business-to-consumer division, Places to Stay."

Losses at Places to Stay led CNG to put the unit on the market last June, less than a year after it paid $12.5 million (€ 10.11 million) in cash for the business in a deal with US group World Re.

CNG said at the time of the deal last August that it expected Places to Stay would boost its earnings within a year. However, the company said in June that the integration of the brand and software "has been slower than anticipated".

The company has attributed the underperformance to the unit lack of scale vis-à-vis some of its biggest rivals, but said the business would make a contribution in 2005.