Efforts by Gresham Hotels to establish a connection between its 28 per cent shareholder, Red Sea Hotels, and 4 per cent shareholder Mr Ian Ilsley have been rejected by the Irish Takeover Panel.

The panel's ruling yesterday said no factual information had been provided to justify a full hearing on the allegations of a concert party. It added: "The panel has ruled that Red Sea and Mr Ilsley are not acting in concert in relation to their respective shareholdings in Gresham."

The ruling will come as a blow to Gresham which had gone to great lengths to establish a link between the Israel-based hotel group and Mr Ilsley, who is based in Monaco. If the Takeover Panel had ruled that a concert party existed, it would have meant that Mr Ilsley and Red Sea owned almost 33 per cent of Gresham and would have been required to make a mandatory bid for Gresham at €1.05 a share.

Now that the panel has ruled that Red Sea is not involved in a concert party, attention will focus on the likely actions of the Israeli group. Red Sea has already threatened to requisition an extraordinary general meeting of Gresham shareholders to force through radical changes in the composition of the board, including the right to nominate three directors, including the chairman.

Gresham for its part has accused Red Sea of trying to get control of the company and has challenged Red Sea to make a formal offer for Gresham if it wishes to get control. But sources believe that Red Sea is reluctant to make a bid for Gresham - not just because of the cost involved but also because it attaches a high value to Gresham's stock market listings in Dublin and London.

In a separate statement, Gresham seems to take issue with the panel's ruling when it said: "Gresham also notes the historical and continuing relationships between Red Sea and Mr Soning (one of Red Sea's proposed nominees as directors of Gresham) and between Mr Soning and Mr Ilsley."

Gresham will hold its annual general meeting on June 19th when a number of directors will come for re-election. Sources believe it is is unlikely that Red Sea will oppose any of the re-elections.