Gresham Hotels has rebuffed an attempt by Red Sea Hotels, the Israeli property group, to take board control. Red Sea - which owns 28.25 per cent of Gresham - sought a reduction in the number of directors from 10 to six, of which three, including the chairman, were to be nominees of the Israeli group.

The request was made to Gresham chairman Mr Sean Henneberry last week. The approach was rejected in a letter sent on Monday to Mr Amos Pickel, the managing director of Red Sea, which has been seen by The Irish Times. Mr Henneberry accuses Red Sea of "seeking to gain control of the company without making an offer to all shareholders". The letter goes on to say that "if Red Sea wishes to control the board then it must make a general offer to the rest of the shareholders".

Gresham has also uncovered links between Red Sea and Mr Ian Ilsley, another shareholder who holds a 4 per cent stake. If Mr Ilsley was deemed to be part of a "concert party" with Red Sea, the group would be over the 29.9 per cent threshold at which it is required to make a bid.

Gresham has established a connection between Mr Ilsley and one of the individuals Red Sea wanted nominated to its board, Mr Harvey Soning. Mr Ilsley and Mr Soning are both directors of Your Space plc, a British-based property company. Mr Ilsley is the finance director of the group while Mr Soning is an executive director and shareholder in the company.

Red Sea told Gresham it wanted Mr Soning on the board because he had advised it on property matters for over 20 years. The Israeli group had also nominated Mr Tom Byrne, formerly of Davy Corporate Finance, as a director with Mr Pickel taking the third seat.

It is not clear if the link between Mr Ilsley and Red Sea is sufficient to constitute a concert party, but it is understood Gresham may ask the Takeover Panel to adjudicate on the matter. Neither Mr Soning nor Mr Ilsley was available for comment yesterday. A spokesman for Euro Sea, the Red Sea subsidiary that owns the Gresham stake, said the firm had no knowledge of Mr Ilsley's holding. "Euro Sea does not control the shares. It is not connected in any shape or form to Mr Ilsley and any suggestion to the contrary is misleading and clearly without foundation," said a spokesman last night.

Red Sea has spent more than €23 million on its stake in Gresham. It initially bought a 16.6 per cent in May 2000 for €13 million from the Ashdown family, then 6 per cent from Donegal hotelier brothers Brian and Sean McEniff.

Gresham shares closed up three cents last night at 87 cents. Any bid by Red Sea would have to be at around the €1.05 it paid for its existing holding. Even this offer would be well short of the €1.78 per share value put on the firm's assets by Goodbody Stockbrokers.