The group of investors seeking to win control of the Gresham Hotel Group have had their approach rebuffed by the company's largest shareholder for the second time.
It emerged yesterday that Red Sea, the Israeli hotel group that holds 28 per cent of Gresham, is refusing to accept the consortium's approach at €1.35 per share.
This means that the approach will automatically fall since it was conditional on being accepted in respect of 80 per cent of Gresham shares.
The consortium is now left with two clear options - either it can walk away from its five-month effort to buy the company or it can proceed with the support of the majority of the Gresham board, but without the support of its largest shareholder.
Shares in Gresham plunged on the latest twist, closing at €1.10, down eight cents.
The development brings the process back to the point it reached last December, when the Deloitte-led consortium previously withdrew an 80 per cent acceptance condition because Red Sea was not prepared to give its approval to the €1.35 offer.
At the start of February, the level of this first approach was raised to €1.45 and the 80 per cent clause was re-inserted.
The €1.35 approach that was rejected yesterday was made at the start of this month after the consortium had completed due diligence on Gresham and decided that its then proposed offer of €1.45 was too high.
In a statement released to the market yesterday afternoon, the Gresham board said the new offer at €1.35 was not capable of acceptance due to Red Sea opposition.
It is believed that the Gresham board and the consortium have been in intensive discussions over the past two to three weeks, as pressure grew for the consortium to table a formal offer.
The consortium is understood to have reluctant to do this in the absence of an irrevocable acceptance in respect of Red Sea's 28 per cent shareholding.
It emerged on Wednesday evening that this irrevocable acceptance was not forthcoming.
It would have been possible for Red Sea to make an irrevocable acceptance conditional upon a higher offer not emerging for Gresham in the short term but this option was not taken.
It is believed that the majority of board is strongly in favour of the consortium's current approach, with just one member representing Red Sea still resisting the advance.
If the consortium chooses to proceed with its takeover attempt, it will table an offer of €1.35 that would not be dependent on approval in respect of 80 per cent of Gresham's shares.
Instead, it would see the investors seeking approval in respect of at least 50 per cent of Gresham shares so that they could gain control of the hotel group's board.
The likelihood then would be that the constitution of the board would change and the company would be delisted. This would mean that Red Sea would become an opposition block within the company, with opportunity to sell its holding limited by a lack of liquidity in the delisted shares.
