The Takeover Panel is investigating an Israeli bank's purchase of a stake in Gresham Hotel Group to see if the bank could be acting in concert with Gresham's largest shareholder Red Sea.
The Discount Bank of Israel started to buy shares in Gresham last week and has since built up a holding of 3.7 per cent in the firm.
Headed by chief executive Mr Amos Pickel, Red Sea, which is believed to have denied any link between itself and the bank, owns 28.3 per cent of Gresham.
In normal circumstances, a further 3.7 per cent would push the Israeli hotel group over the level at which it would be forced under company law to make a bid for Gresham.
A proven connection between the Discount Bank of Israel and Red Sea would be even more significant as things stand however, since Gresham is in a takeover period.
If the Takeover Panel found that the two parties were acting in concert, it could force them to either sell their shares or make an offer higher than the €1.35 that has already been flagged by the three investors who have been circling the firm since last November.
Red Sea has been invited to discuss the matter further with the Takeover Panel within the coming week. The Panel is expected to issue a statement on the matter to the Stock Exchange today.
It is understood that the 3.7 per cent stake was purchased in small blocks by US investment bank State Street, on behalf of the Discount Bank of Israel, with the first trade taking place last week.
Gresham is believed to have asked the Discount Bank of Israel to disclose the identity of the beneficial owner of the shares but the request was declined.
The bank, which is distinct from another Israeli bank that holds a charge over Red Sea's Gresham shares, is believed to have cited Israeli secrecy laws as justification for the refusal.
The buyer should, under Takeover Panel rules, have identified themselves as soon as their holding crossed 1 per cent.
The Deloitte-led consortium of investors in discussion with Gresham issued a statement on Tuesday indicating that it would make an offer for the company before the end of this week.
It is unclear at this stage how the latest development will affect this timetable, or indeed how it will affect the plans of the investors - property developer, Mr Bryan Cullen; solicitor, Mr David Coleman and builder, Mr JJ Murphy.
The businessmen have said they will pay €1.30 per share for Gresham if they can get approval in respect of 54 per cent of the hotel group's shares.
If this approval level were to rise to 80 per cent, the price would climb to €1.35.
An approach at €1.35 has already been rebuffed by Red Sea.
Even if a link between the hotelier and the Discount Bank of Israel is not proven, the bank's stake could act as a substantial irritation to the consortium.
If the bank decided to vote against the investors, it would reduce their chances of achieving even the 54 per cent approval level.
Shares in Gresham rose one cent to €1.27 yesterday on the Dublin market.
