THE breakdown of a £320 million takeover proposal for Iomart is believed to be a result of a disagreement on pricing.

The confirmation of the collapse of the talks saw £39m knocked off the cloud computing specialist's market capitalisation.

London-based suitor Host Europe Holdings, which is backed by private equity firm Cinven, had been in talks since last month over a potential offer at the 300 pence per share mark.

It had seen previous attempts to engage Iomart, with proposals of 275p and 285p, spurned by the board of the Glasgow firm.

Iomart chief executive Angus MacSween, finance director Richard Logan and operations director Sarah Haran had been working with Host Europe to progress the most recent proposal to a full offer.

All three executives would have been in line for large windfalls if a transaction had gone ahead.

Mr MacSween, co-founder of the business along with brother-in-law Bill Dobbie in 1998, could have got in excess of £50 million if an offer at 300p per share had been tabled and accepted.

He holds 16.8 million shares which is equivalent to around 15.75 per cent of the business.

Ms Haran, who has been with Iomart since 1998 and was appointed to its board in 2000, holds 1.96 million shares, around 1.84 per cent of the company.

Mr Logan, a chartered accountant who joined the firm in 2006, has 980,000 shares, giving him a stake of less than one per cent.

It is understood Host Europe walked away after both parties were unable to agree on the price per share of a full offer.

Host Europe is thought to have been leaning towards making a bid at less than the 300p it had originally entered the talks with but that was met by resistance from the Iomart board.

Iomart's shares began sliding on Monday closing that day at 262.75p and with a market capitalisation of more than £283m. But it was not until after the market closed that Host Europe confirmed it would not be making an offer.

Yesterday Iomart's stock price continued to tumble ending the day down 36.25p, or 13.8 per cent, at 226.5p giving it a market cap in the region of £244m.

Iomart said: "The board of Iomart notes the announcement by Host Europe Holdings Ltd, a company controlled by funds managed by Cinven Capital Management General Partner Limited, that it does not intend to make a formal offer for Iomart.

"Accordingly Iomart is no longer considered to be in an offer period for the purposes of the City Code on Takeovers and Mergers."

Host yesterday declined to add anything to the statement it published on Monday night which said it had terminated discussions and was no longer considering making an offer. Under Takeover Panel rules it is not permitted to make another approach to Iomart for at least six months.

Iomart also chose to publish an upbeat trading statement yesterday which said it has performed strongly in the six month period to the end of September.

It said: "Trading has been in line with management expectations, with both revenue and profits expected to be substantially ahead of the comparative period last year."

Mr MacSween said: "The group has delivered strong growth as we continue to execute on our focussed strategy of providing high quality and high margin managed solutions. With an outstanding track record and an established reputation as the UK's leading cloud computing company, we look forward to the future success of Iomart."

The company has around 350,000 business customers, owns six data centres and has a 1,860 kilometre fibre optic network.

Cinven entered the European IT market when it bought Host Europe in August last year in a deal valued at around £438m.