Global Radio, whose stations include Heart and Galaxy, has made a takeover bid for GCap Media which would value the company at more than £300m.
Privately owned Global, which is headed by former ITV chief executive Charles Allen, made an approach in writing on 17 December which was rejected two days later by GCap's chairman Richard Eyre.
Global will today release a statement to the stock exchange confirming its interest in the owner of Capital 95.8, Xfm and Classic FM.
"This approach was conditional, inter alia, on limited due diligence and the recommendation of the GCap board for any offer," the statement says. "This approach was rejected by the GCap Board."
Global is considering its position and "there is no certainty that an offer will be made", the statement continues.
It will now be up to shareholders to put pressure on the board to consider a possible take-out which is believed to value the company at 100m more than its stock market value on Friday. If a deal went ahead it would combine the country's two most popular commercial stations.
It is thought the board did not make the approach public to shareholders as they believe it undervalues the company.
Mr Eyre is keen to give Fru Hazlitt, who it was announced had been appointed as chief executive on December 20, a chance to increase the value of the company. Ms Hazlitt is a former managing director of Yahoo! UK & Ireland and her understanding of the internet has impressed the board. She is expected to announce her strategy for the group within weeks.
But in the current climate, with advertising revenues under pressure, it is thought to be unlikely that she will be able to boost the group's share price to the levels Global, which paid 170m for Chrysalis Group's radio stations last year, are believed to be offering to pay. Just last week, media analysts at Numis issued a research note downgrading GCap, recommending clients "reduce" their holdings. Analysts have a range of target prices for GCap shares of 120p-130p.
Global, which wishes to extend its presence in commercial radio and whose backers include Irish racing tycoons John Magnier and J P McManus, is understood to have been keen to take advantage of a 41 per cent fall in GCap's share price over the past year, which has given the company a market capitalisation of £201m.
Even if GCap is successful in defending itself against Global, it is thought the interest in the group could spark a bidding war.
GCap, which has more than 90 digital stations including Planet Rock and Chill,was formed from the merger of Capital Radio and GWR in 2005, creating the UK's leading commercial radio group representing approximately 30 per cent of the total commercial radio industry.
In November, the group said revenues had picked up amid signs that it had so far avoided fall-out from the financial turmoil engulfing the markets.
Underlying profits for the six months to the end of September were down slightly at £5.6m, compared with £5.8m in 2006.Reuse content