GCap Media rejects £313m takeover by Global Radio

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The Independent Online

Shares in Britain's largest commercial radio operator Gcap Media rose by nearly 50 per cent yesterday after the group confirmed it had received and rejected a 313m offer from Global Radio.

The Classic FM and Xfm owner said Global, which owns the Heart and Galaxy stations, had made an indicative proposal at 190p a share a 57 per cent premium to GCap's closing share price on Friday. GCap said the offer from Global, led by the former ITV chairman Charles Allen, "significantly unvalued the company".

The board is understood to have been encouraged by the reactions of several of major shareholders after explaining the reasons behind the decision.

Reports at the weekend had suggested that Global, which was set up to invest in UK radio proposed an offer at 180p a share but GCap was keen to give its new chief executive, Fru Hazlitt, a chance to increase the value of the company.

Global confirmed its approach had been rejected, adding that it was "considering its position".

Ms Hazlitt, who was appointed less than three weeks ago, said she would unveil her plans to revitalise GCap next month but did not reject the logic of a deal outright.

"Our focus is on putting a plan together that is about creating value and growth and managing costs," she said. "That is the focus and will remain so unless the picture dramatically changes. "Consolidation is good thing but it can also be a distraction. Like every public company at moments like this, our duty is to the shareholders We believe we can put together a plan that will create value for shareholders."

However, analysts predicted Ms Hazlitt would have a hard job convincing investors to stick with the company amid a challenging environment for the industry. Alex DeGroote, an analyst at Panmure Gordon, said: "On the back of the Global approach, counter offers are likely in the near-term."

The expectation is that the bid could just be an opening salvo from Mr Allen. If he succeeds in taking over GCap, he would control a behemoth of the radio industry. Last month, his plans to lead a consolidation drive were spoiled when he was outbid by the German magazine publisher H Bauer for Emap's radio business.

Ms Hazlitt is expected to place greater emphasis on internet radio. She said the wider availability and better quality of high-speed web access represented a major opportunity for GCap, which has struggled to retain listeners and advertisers. "People are consuming our brands online," she explained. "The internet is now a completely different experience and lends itself beautifully to further translate what we do on air."

GCap is expected to be canvassing the views of its leading shareholders, particularly after reports that Global's approach was rejected a few days before Ms Hazlitt was named chief executive on 20 December. That bid, however, was not made public until after Global revealed its hand this weekend.

GCap's share price closed at 176p last night.

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