Shares in Gresham Hotels have risen to their highest level since the bitter dispute with Euro Sea Hotels became public, after more than 4 per cent of Gresham shares changed hands on the Dublin market.

Gresham shares closed three cents higher on €0.91.

While there was early speculation that Mr Ian Ilsley - the British investor whom Gresham has alleged has links with Euro Sea - might have been the seller, the dominant view in the market was that the selling came from the few institutional investors still on the Gresham share register.

Some disagreed and said they believed that Mr Ilsley was the seller.

Mr Ilsley himself could not be contacted for comment, but if he was the seller then he has taken a loss of more than €1 million on his investment as he is thought to have bought his shares at €1.20 each. For this reason alone, many in the market believe that he is highly unlikely to be yesterdays's seller.

Gresham has alleged that because Mr Ilsley and Mr Harvey Soning - a Euro Sea nominee to the Gresham board - are both directors of a British property company Your Space, then there may be a concert party situation which would force Euro Sea into a situation where it would be forced to make a formal bid for Gresham. Euro Sea has said, however, that it has no knowledge of Mr Ilsley. Gresham has now referred this issue to the Takeover Panel.

More than 3.8 million Gresham shares changed hands, with most of these in three transactions involving 3.5 million shares. Sources close to Euro Sea emphasised that it was not a buyer of any of the shares and its stake remains at 28.25 per cent.

If institutional investors were the sellers yesterday, then the number of suspects is very small, as most institutions have long deserted Gresham shares.

Less than 10 per cent of the shares are held by institutions, with Fidelity holding 2 per cent, Scudder Global 3 per cent and Irish Life 1 per cent.

Substantial private shareholders include the Walsh family with 3 per cent and veteran investor Mr Kevin Anderson with 2 per cent. Overall, private shareholders own 64 per cent of Gresham shares while the board owns 2 per cent.

Most of the shares sold yesterday are thought to have been picked up by British hedge funds taking a position on a possible bid by Euro Sea at not less than €1.05 a share, the price at which the Israeli group recently bought BIAM's 6 per cent stake in Gresham.

However, there is also speculation that BIAM - after selling those shares at €1.05 - may have been back in the market, buying at yesterday's prices between €0.85 and €0.91.

The bitter war of words between Euro Sea and Gresham is now likely to culminate in an e.g.m. of the Irish group, where Euro Sea is likely to press for radical changes in the structure of the Gresham board, changes that Gresham has alleged is an attempt to gain control of the company without making a formal offer to shareholders.

A Gresham spokesman said: "This is not about the board, it's about obtaining a fair bid for all shareholders."

There is a strong belief that Euro Sea does not want to make a formal offer for all of Gresham, not least because of the cost involved, but also because it puts a high value on the Irish company's stock market listing in Dublin and London.

Euro Sea has interests in 10 hotels in Europe, with holdings in these hotels varying from 35 per cent to 100 per cent.