Chrysalis has been outbid by its two competitors, according to industry sources. "Chrysalis have privately accepted they are unlikely to get Melody as the price has gone too high," said one City observer.
Melody has attracted widespread interest from a host of radio operators since being put up for sale by Hanson, the building products group.
However, the bidding war has pushed the price sky high and has left just two companies in the hunt. GWR, the west of England radio operator, also pulled out of the bidding for the station last month.
Melody was originally predicted to fetch around pounds 20m, but those expectations soon escalated to pounds 25m.
Analysts now believe that the final price tag could rise even higher, with some putting the final figure over pounds 30m. Chrysalis is believed to have put in an aggressive bid for the radio station, but even that has turned out to be too low to capture Melody.
"Whoever buys Melody will have to pay through the nose," said one media analyst yesterday.
Chrysalis is keen to expand its radio business and is also in the running for the huge radio franchise in the North-west which is due to be awarded in the next few days.
However, it faces stiff competition from most of the big players in the industry in its bid for the licence, which is the biggest outside London.
Hanson received three firm bids last week from Emap and Scottish Radio last week. It is expected to announce the buyer within the next two weeks.
The high price on offer for Melody has surprised industry followers. Its mainly older listeners are less attractive to advertisers.
Analysts estimate that the business has annual revenues of just pounds 5m.Reuse content