GCap rejects Allen's offer for radio

Charles Allen's plan to buy GCap Media was "dead in the water" yesterday after Fru Hazlitt, the chief executive, rejected his marginally improved offer for the owner of Capital Radio, analysts said.

GCap said the £333m bid tabled by Mr Allen's Global Radio "significantly undervalues" the company and that shareholders would be much better served by a recovery plan laid out by Ms Hazlitt last month. With a "put-up or shut-up" deadline from the Takeover Panel set for 5 March, Mr Allen has just five days to make an improved formal bid or walk away for at least six months.

The 202p-per-share offer represented a miserly 5 per cent increase over an initial 190p-per-share proposal that GCap refused in January. Analysts were surprised that Mr Allen did not make a richer bid and said a deal was now unlikely unless he comes back with a knockout deal pitched at about 220p per share, a level previously flagged by analysts. "This was a statement of intent, and 202p is a measly increase," said an analyst. "It's dead in the water." Global Media declined to comment.

In a statement to the Stock Exchange, GCap, which also owns Classic FM, said the deal "does not reflect that these are unique assets" and that the lack of firm financing meant it carried a level of uncertainty that was "unacceptable". Ms Hazlitt spoke with top shareholders and said that she "has their support" in rejecting the offer. GCap's top five shareholders – Schroders, Fidelity, DMGT, Aviva and Standard Life – own more than half the company.

Ms Hazlitt, who took over in December last year, set out her vision last month for the company that puts more focus on its traditional radio stations and the internet at the expense of digital radio, an area of focus for the previous management. She announced that GCap would sell its majority stake in Digital One and close down a pair of other channels, Planet Rock and theJazz. The plan would save the company millions a year and, in theory, increase its margins.

The former head of ITV is keen to consolidate the radio sector, having bought Chrysalis last year. Ms Hazlitt said she has not engaged with Mr Allen, but added that he did speak to GCap's chairman, Richard Eyre, to inform him of the improved bid. She said: "We rejected this offer so it would have to be a very different one for them to get back in touch."

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