Gresham prepare for Red Sea battle

ANNUAL General Meetings in Ireland are rarely fractious affairs. Save for Eircom, and lately Smurfit, very few are dominated by serious questions from the floor and very few motions are defeated.

It must have, then, come as a shock to Gresham Hotels shareholders when three of its directors, including two executive directors were unceremoniously booted off the board at its AGM in June.

It probably came as no surprise to the Gresham management, who would have known how many proxy votes had come in. But to the hundreds of shareholders who make their way to the Gresham Hotel each year, it was their first taste of the acrimonious war of words between Gresham and its main shareholders Red Sea Hotels, an Israeli property group, that has been building for some time.

While much of the manoeuvring has been going on for months behind the scenes, it came as a surprise to the markets that the three directors were ousted and that the remaining four non-executive directors could be facing a similar fate this week.

Red Sea have called for an extraordinary general meeting to remove long-serving chairman Sean Henneberry, non-executive directors Laura Magahy, Patrick Bourke and David Bunworth.

Red Sea wants these replaced by its director Amos Pickel, Tom Byrne, the former managing director of Davy Corporate Finance, property consultant Harvey Soning (to replace Mr Henneberry) and at a later stage a seventh director to be chosen by Red Sea and Gresham management to be independent of both sides.

Gresham has made the point that if Red Sea gets control of the board, it will have effective control of the company without making an offer to shareholders. It is also concerned about what Red Sea plan to do with the company.

Two years ago Red Sea acquired the 16% stake held in Gresham by the Ashworth family as part of its plans to expand, particularly in European city centre hotel market. It also snapped up the stake owned by the McEniff brothers and in April acquired more share blocks to bring to its current position.

To complicate matters further, Gresham announced last month that it was in preliminary discussions with a possible bidder for the company. While it would not say who, it is widely believed to be Nigel McDermott, the co-founder of NCB Stockbrokers. The talks between the two broke down last week without an offer being made.

But one source said that given there had been little communications between Gresham and its shareholders over these talks, they could not have been that serious.

Both sides have been active in recent weeks putting their arguments to shareholders after talks between them over restructuring the board broke down. As an example of how bitter the row has become, Gresham and Red Sea dispute why and when these discussions broke down.

Gresham is unlike many other public companies in Ireland in that the majority of its shares are in the hands of ordinary shareholders, which could leave the vote going either way.

Red Sea has a huge stake and combined with the 4% held by British businessman Ian Illsey, who voted with Red Sea to get rid of the directors in June, have a guaranteed 32%. Gresham has been busy urging shareholders to vote by phone (without telling them who to vote for). With around 9,000 ordinary shareholders the battle will be decided by individual shareholders with larger stakes.

With just a few days until Thursday’s meeting at the Gresham in Dublin, few analysts are calling the outcome. They are, though, expecting it to be a long and heated meeting.

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