Ryan Hotels may become a takeover target following the acquisition of a 16.6 per cent stake in the company by the Israeli-controlled group, Red Sea Hotels. It bought the stake for €13 million (£10.2 million).

Red Sea bought the shares at the current market price of €1.00, but no spokesman for the Tel Aviv-based group was available to comment on the investment or to say whether it plans to buy more shares or make a bid for the Irish group. The investment by Red Sea had no impact on Ryan shares which closed 5 cents lower on €1.00, which values the company at €75 million (£59 million).

A spokesperson for Ryan said that it was policy not to comment on market speculation but said "it's business as usual". She was unable to say whether the investment by Red Sea had come as a surprise, but it is understood that the Ryan board was aware that the Guernsey-based Ashdown family, which sold its entire holding to Red Sea, wanted to reorganise its investments.

Industry sources said that there was no logic to the investment in Ryan by Red Sea unless the Israeli group planned to mount a bid. "Why would any hotel company buy 16 per cent of a publicly quoted hotel company unless it planned a bid?" asked one source, who added that Ryan's chain of 10 hotels would complement Red Sea's chain of hotels in Europe and the Middle East.

Red Sea Hotels is controlled by the Papouchado family and has the European and Middle East franchise for the American-based Park Plaza and Park Inns chain. There are six Park Plaza hotels in Germany - in Berlin, Frankfurt, Dresden, Cologne, Leipzig and Wittenberg; three in Holland - Amsterdam, Eindhoven and Utrecht; three in France - Futuroscope, Le Touquet and Paris; and one each in Antwerp, London and Budapest. The group also six hotels in Israel, one in Oman and one in Palestine.

In contrast, Ryan has six hotels in the Republic - the Gresham in Dublin, the Royal Marine in Dun Laoghaire, the former Metropole in Cork and Ryan hotels in Galway, Limerick and Killarney. But the group also has four hotels outside the State - in London, Hamburg, Amsterdam and Brussels.

Although Ryan shares are currently trading around their best level since the turn of the year, they are still well below their €1.27 high of two years ago. There is a perception in the market that Ryan has been comparatively slow to expand its operations, with its performance inevitably compared to Jurys Doyle, the recently merged hotel group that is now five times Ryan's size in terms of market capitalisation.