GCap opens books to Global as investors back increased offer

GCap, the media group that owns Capital Radio and Classic FM, agreed yesterday to open its books to Global Radio, the radio company that has been stalking it for several months.

GCap's announcement follows a third approach to it from Global Radio, made on Monday, indicating it would be prepared to make an offer for the company worth 225p a share. Analysts said yesterday that GCap, which has previously rejected indicative offers of 190p and 202p from Global Radio, would find it much harder to turn down the improved bid.

Standard Life, one of GCap's largest shareholders, publicly urged the company to hold talks with Global Radio, and other investors privately made the same representations.

The Takeover Panel agreed yesterday to a request from GCap for an extension to the "put up or shut up" deadline it had previously given Global Radio. The two companies will hold talks over the next few weeks, with Global Radio given until 26 March to make a formal offer for the company.

Global Radio is run by former ITV boss Charles Allen and has financial backing from the Irish tycoons JP McManus and John Magnier. It launched into the radio market last year with the £170m purchase of Chrysalis Radio, whose stations include Heart and Galaxy, but lost out in Dec-ember in the race to buy Emap's radio business.

That failure may underpin Mr Allen's determination to secure the purchase of GCap, analysts said. Roddy Davidson, an analyst at Altium Securities, described the 225p proposal as "a generous offer".

Shares in GCap rose almost 6 per cent yesterday to close at 211p, compared with a price of 127p in Dec-ember, just prior to the announcement of Global Radio's interest in the company.

A combination of GCap and Global Radio would create the UK's largest commercial radio network, with around a half-share of the country's total audience. As such, the deal would be scrutinised by the Competition Commission, which could order the sale of some stations.

However, GCap's management, led by Fru Hazlitt, who was appointed as chief executive in December, has until now been keen to maintain its independence. Ms Hazlitt last month announced a series of cost-cutting measures, including a retreat from digital-only radio stations.

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