Dunloe House, despite having an initial approach rebuffed by the Ewart board, has gone ahead with a £25 million bid for the Belfast property company. The bid is seen in the market as hostile and the stage is set for a battle between the Ewart board and Dublin solicitor Mr Noel Smyth, who has substantial shareholdings in both companies.

Mr Smyth has a 26 per cent stake in Ewart but cannot take part in any discussions on the Dunloe offer. Mr Smyth also has a 25.8 per cent stake in Dunloe and the bid for Ewart represents a move by the Dublin solicitor to create a cross-Border company in which he will have a major stake.

Last week it emerged that Ewart described an approach by Dunloe offering shares, cash or loan notes for Ewart as "unacceptable" and demanded in effect that Dunloe either put its offer in writing or withdraw.

The size of the suggested offer from Dunloe was never disclosed but it is understood that it was broadly the same as the £25.3 million formal offer unveiled last night.

Neither side would comment on the offer, but it is thought that Dunloe's decision to pitch its formal offer at the same level as its suggested offer will be treated as hostile by Ewart. The 67p sterling bid offers virtually no premium to Ewart shareholders as Ewart shares last traded at 67 1/2p sterling. The Belfast group has an estimated net asset value of around 71p sterling per share.

While Mr Smyth cannot become involved in the Ewart board's discussion on the formal bid from Dunloe, he can vote his 26 per cent of the shares in favour of the offer. A pivotal role will be played by Ewart chairman, the Hong Kong businessman Brian O'Connor, who owns 15 per cent of the shares.

As chairman, Mr O'Connor would have been part of the board's decision to describe Dunloe's initial approach as "unacceptable". But sources close to Dunloe have suggested that with a formal offer on the table, the Ewart chairman may be more amenable to the approach from Dunloe. The rest of the Ewart board has a minuscule stake in the property company - less than one per cent.

Institutional shareholders - led by the Gartmore Irish Smaller Companies Fund, Guardian Royal Exchange and Prudential are also seen as likely supporters of the bid, in the absence of a higher offer emerging from a third party.

Dunloe has offered 18 of its own shares for every five Ewart shares and has also offered a cash alternative of 67p sterling and a further loan note alternative worth 70p sterling a share. If the takeover bid succeeds, Dunloe would have a market capitalisation of more than £100 million with extensive property interests in both the Republic and the North.

Since its major restructuring in August which saw the group buy various properties from Mr Smyth, Mr Phil Monahan and Mr Dominick Glennane for more than £21 million as well as raise £25 million in a placing, Dunloe has expanded rapidly.

Work on a £23 million, 227,000 square feet multi-purpose development in Tralee is set to begin early next year while the group has also acquired a 3.85-acre dockland site in Dublin for £7.5 million. This is to be developed into a £40 million hotel, offices, residential and office complex in a joint venture with a construction company.

In contrast, Ewart has been expanding at a much slower rate.