Outrage as founders make 10p Claims Direct bid

The two founders of the sickly "no-win, no-fee" personal injury company Claims Direct – who have both been demoted from executive positions – are set to make an offer to buy the business

The two founders of the sickly "no-win, no-fee" personal injury company Claims Direct – who have both been demoted from executive positions – are set to make an offer to buy the business, offering just 6 per cent of the price the company floated at a year ago.

Claims Direct yesterday announced that Tony Sullman, the former taxi driver who set up the business, and Colin Poole, its chief executive until three weeks ago, have made an approach. The informal offer values the business at 10p a share, a dramatic discount to its float price of 180p and the high it once reached of 353.5p.

Both Mr Poole and Mr Sullman have stepped down from front line management of the company, which has issued three profits warnings in the past year. Mr Sullman, who was the chairman, took up a non-executive role in January and Mr Poole became non-executive deputy chairman.

The heavily discounted offer triggered a further dive in the share price, which closed down 2.5p at 12.5p. It will not sit easily with many investors that Mr Sullman sold half of his shares in the float, netting £50m. Mr Poole did not sell shares but received £10m from selling part of the firm of solicitors he used to work for to Claims Direct. The two still own or speak for 43 per cent of Claims Direct's shares.

One analyst who follows Claims Direct said: "This offer stinks because it is not a formal offer but the two testing out the market to see what it thinks of 10p."

Mr Sullman and Mr Poole may have to raise the price, but any increase would probably not have to be significant as the company has been beset with problems over the past year. The two have undertaken to raise their offer if another bidder presents a better deal, or to accept that other deal in respect of their own shares.

Claims Direct has attracted a barrage of bad publicity over the fact that many of its past customers who won their personal injury claims ended up receiving negligible payouts because they had to pay a compulsory insurance premium out of their winnings. The problem has severely affected Claims Direct's new business. Yesterday it announced a pre-tax loss for the year to 31 March of £20.2m, compared with a profit of £10.1m, and said that its number of new cases continued to fall.

Paul Doona, the managing director, saidClaims Direct still faced serious problems. But he said there was "good news" in the recent Court of Appeal ruling that insurance premiums should be recoverable from defence insurers rather than customers.