Claims Direct poised to go private as founders' bid is reluctantly accepted

The hostile takeover battle for Claims Direct took an unexpected twist yesterday when its independent directors recommended a discounted offer from the personal injury company's two founders which the board previously damned as "deeply cynical".

In a letter to shareholders, the directors said they had "reluctantly recommended" the 10p a share offer made by Tony Sullman and Colin Poole, formerly the company's chairman and chief executive, because it provided "a certain amount in an uncertain environment".

The directors were left with little choice but to recommend the £19.4m bid as they have failed to find an alternative offer ahead of Monday's deadline for acceptances of the Sullman-Poole offer, made by a holding company called Barker Securities.

However, the independent directors, led by David Hankinson, made no attempt to disguise their anger: "We recognise that the change in recommendation will come as a bitter blow to all those who have indicated their willingness to tackle the various problems that have plagued the company over the past months, especially the management, staff and franchisees. We believe that many of these individuals would wish us to reject a bid from Messrs Sullman and Poole at any level."

Mr Hankinson added: "We have been backed into a corner, because we asked them to extend the offer and they have refused. This has meant that if they then lapse the offer next Tuesday shareholders face the possibility of not even getting 10p."

The four independent board members had wanted Mr Sullman and Mr Poole to agree this week to extend their offer so that there would be more time to conclude an alternative deal with a private investor in Claims Direct. The investor, Simon Ware-Lane, has been negotiating with Mr Sullman and Mr Poole about buying some of their 43 per cent stake.

Mr Ware-Lane is experienced in working in the personal injury sector and owns a stake in the privately owned company Claimline. Claims Direct supported the talks as a way to diminish the shareholding of Mr Sullman and Mr Poole and also as a means of ousting them as non-executive directors.

The talks between Barker Securities and Mr Ware-Lane are expected to continue over the weekend. Next Tuesday Mr Sullman and Mr Poole, who are being advised by KPMG, may announce a deal with Mr Ware-Lane, or they could extend their offer for the company or withdraw it.

It is understood that there are serious stumbling blocks to reaching an agreement with Mr Ware-Lane, who has held shares in Claims Direct since it floated last July and now has a 4.25 per cent holding.

He cannot buy their entire stake unless he then makes an offer for the whole company, which he does not appear to want to do. If he buys up to 29.9 per cent ­ the maximum he could take before triggering a full takeover offer ­ Mr Sullman and Mr Poole would be left with a stake of 13 per cent.

In order to agree to this deal, the two may insist upon some form of guarantee that the value of their remaining stake will not dip below a certain level.

Yesterday Claims Direct shares fell 16 per cent to 9.5p, a 95 per cent discount from their flotation price last July of 180p.

If Mr Sullman and Mr Poole manage to gain control of the company, they may wind the business down and sell off its assets rather than attempt to revitalise the loss-making "no win, no fee" group.