Fear that takeover talks on the Gresham Hotel group had collapsed sent the firm's shares tumbling yesterday and forced the board to confirm that discussions on a deal were, in fact, continuing.
Shares in Gresham closed 16 per cent weaker at €1.10 last night after being sold off throughout the day.
Much of the activity, in which almost two million shares changed hands, is believed to have stemmed from clients of smaller Dublin stockbrokers.
Market sources attributed the fall to rumours that the Deloitte-led takeover effort had foundered.
The Gresham board reacted to this by issuing a statement to the contrary after the market closed.
The board said it had noted the downward movement in Gresham shares and, having raised the matter with the offer consortium, was happy that the offer process was continuing.
"Discussions are ongoing with a view to the consortium making a 2.5 announcement [a firm intention to make an offer\] in due course," the statement read.
Gresham said at the start of February that discussions were being held with a view to a firm offer being tabled by the week beginning March 22nd.
It emerged at that stage that the three businessmen behind the approach had raised their proposed bid from €1.35 to €1.45 per share. Due diligence was scheduled to begin the following week.
The consortium - comprising property developer Mr Bryan Cullen, solicitor Mr David Coleman and builder Mr JJ Murphy - has been circling Gresham since last November, when its shares were trading at €1.15.
The group made an initial approach at €1.35 which was rebuffed by Red Sea Group, the Israeli hotel firm that owns 28 per cent of Gresham.
This led the consortium to remove an 80 per cent acceptance condition from its proposal, only to re-insert it when the approach price was raised to €1.45. This suggested that the higher offer level was more acceptable to Red Sea.
The consortium did not comment on the matter last night, with a Gresham spokeswoman declining to go beyond the statement.
It is believed however that yesterday's share-price movement came as a surprise to the hotel group, which is thought to have been unaware of speculation in the market.
It is understood that due diligence has been progressing over the past few weeks, with frequent meetings taking place between Gresham and its would-be buyers.
