The six-member board of the Gresham hotel group, including three representatives of the Israeli-based Red Sea consortium, have met to discuss the future management of the besieged company.
A spokeswoman for the Gresham group described the meeting as "useful and productive" while a spokesman for the Red Sea group said it was "business as usual".
Another board meeting is expected to be convened shortly to decide on the appointment of a seventh director. This individual is likely to be appointed to act as Gresham group chairman.
The hotel group's chief executive, Mr Patrick Coyle, is currently also acting as chairman, but has indicated that this is likely to be a temporary arrangement to ensure the orderly conduct of its business following the removal of chairman Mr Sean Henneberry.
Shares in Gresham fell by four cents to 68 cents in Dublin yesterday with dealers reporting some selling activity now that a takeover bid is unlikely to emerge. Analysts are preparing to downgrade their profit forecasts following a profit warning earlier this week.
Gresham claimed that the requisitioning of yesterday's extraordinary general meeting by Red Sea had cost the company between €0.5 million and €1 million. It has also been adversely affected by what it described as the worst year in a decade for Irish tourism.
Analysts had been expecting Gresham to achieve pre-tax profits of around €3.2 million in 2003 but the outturn is now expected to be substantially lower.
Mr Stephen Furlong, an analyst at Davy Stockbrokers, said it would take some time to turn the company around. "There needs to be both a recovery and growth for the share price to improve. There also needs to be some investor interest from the institutions."
The Red Sea consortium includes the Israeli-based Euro Sea Hotel Group and a subsidiary company, Irish River Holdings. Through these two vehicles, the Israeli Red Sea Hotel Group owns 28.25 per cent of Gresham, making it the single biggest shareholder. On Thursday it secured shareholder approval to remove four Gresham directors, having earlier removed three others, and the election of its three nominees - Euro Sea chief executive Mr Amos Pickel; Mr Harvey Soning, a property adviser to Euro Sea; and former managing director of Davy Corporate Finance Mr Tom Byrne - to the board.
These three directors met the three remaining directors - Mr Coyle, finance director Mr Bobby Bastow and non-executive director Mr Donal Chambers - in Dublin yesterday.
The Red Sea Hotel Group has now effectively seized control of Gresham and will be seeking to implement its strategy to generate a return on its investment.
Red Sea is a publicly quoted company listed on the Tel-Aviv stock exchange. It is principally involved in property development, ownership of hotels, and management of apartments and office and residential buildings in Israel, Europe and the US. The group has a stock market valuation of €44 million. Red Sea Hotels is 49 per cent owned by the group's founder, Mr Eli Papouchado.
Euro Sea operates and develops hotels throughout Europe where it has 10 four-star city centre hotels in the Netherlands, Britain and Hungary. In 2001, the group reported a net loss of €9 million compared with a profit of €18.2 million in the previous 12 months. It has not paid a dividend to shareholders in the past two years and, at the end of December 2001, had total assets of €337.6 million.
It acquired its first shareholding in Gresham in May 2000 buying 17 per cent of the hotel group.
