O'Regan must exit Thomas Read - Connolly

Financier Paul Connolly has offered to assume potential tax liabilities of the Thomas Read Group in order to settle his dispute with minority shareholder Hugh O'Regan.

However, Mr Connolly, who owns 60 per cent of the group, yesterday named Mr O'Regan's departure as the price of his offer, which includes fresh investment in the pub and hotel group.

It emerged in the High Court on Thursday that Mr Connolly had refused to put more money into the group unless Mr O'Regan obtained an indemnity for some potential tax losses which predate Mr Connolly's investment in 2004.

Mr Connolly had been due to buy Mr O'Regan's remaining stake for €5 million last March, but the deal did not proceed.

The potential liabilities are the subject of a High Court case between Mr O'Regan and Bank of Ireland, which is due to be heard later this month. On Thursday, Mr O'Regan failed in a High Court application to force Bank of Ireland to provide the indemnity.

The court was told that the potential liabilities related to the mismanagement of the company's bank accounts by the bank, and surfaced during the due diligence carried out by Mr Connolly in 2003, before he bought his 60 per cent stake for €15 million.

The High Court heard that the original investment by Mr Connolly only proceeded after Bank of Ireland agreed to indemnify the company against the potential liability. However, the indemnity was not provided and Bank of Ireland has said that it did not agree to provide an indemnity.

Mr O'Regan told the court the company was now in financial difficulties and needed additional funds or else may have to go into examinership.Yesterday, Mr Connolly's company, Guerneville Ltd, issued a statement that, following this week's court case, "it will not require Sharmane Ltd to procure an indemnity from the Bank of Ireland as a precondition to it making additional funding available to Thomas Read group".

But, it said, the funding would be conditional on the resolution of a number of issues with other shareholders.

"Principal among these is the requirement for a full exit from the business by Sharmane shareholder Mr Hugh Regan."

A spokesman for Mr Connolly could not clarify whether or not Mr O'Regan would be paid the outstanding €5 million for his remaining shares. The group's banks are supportive of the proposed funding, said Guerneville, which added that it was not involved in the litigation against Bank of Ireland.

Guerneville stressed that the group had a good trading performance recently. The most recent accounts for Sharmane filed in the Companies Office show it had a turnover of €30.6 million in the year to the end of May 2004. The group made an operating profit of €1.4 million, but this fell to €171,000 after interest and tax.

Sources close to the group said it had experienced difficulties due to the smoking ban.