Accept hostile bid, shareholders are advised

Mr Sullman and former chief executive Colin Poole launched their 10p-per-share offer in June, but the independent directors resisted the bid.

But Claims Direct has now told shareholders: "We must reluctantly recommend that you should now accept the offer as being a certain amount in an uncertain environment."

They added: "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."

Those "problems" included issuing a profit warning, adverse publicity over settlement of claims, a Court of Appeal case on conditional fee arrangements and an investigation by the Department of Trade and Industry (DTI).

Although last month the directors said they did not know why the DTI was probing the firm, they conceded: "There can be no guarantee that there will be no further adverse publicity in this regard."

In January, Mr Poole and Mr Sullman, a former taxi driver, stepped down as chief executive and chairman respectively after the group issued the profit warning. Both stayed with the company, however, in non-executive roles.

Their 10p-per-share offer - which was made through Barker Securities, a company set up by Mr Sullman and Mr Poole for the purpose of the bid - valued the firm well below last year's flotation price of 180p.

On Thursday, Claims Direct called on Mr Poole and Mr Sullman to extend the closing date on their offer - set at 3pm on Monday - in a bid to establish another option for the future of the company.

Yesterday, however, it emerged that Barker Securities was in talks with Simon Ware-Lane, a shareholder in Claims Direct counterpart Claimline.

Barker Securities said the talks had yet to settle on any one proposal, although it added there was "a substantial amount of goodwill" on both sides.