UPDATE 1-Global reserves right to raise GCap offer

(Recasts with Global statement on bid options)

By Gavin Haycock

LONDON, Feb 12 (Reuters) - Privately-owned Global Radio said on Tuesday it reserves the right to make a higher offer for GCap Media GCAP.L, Britain's largest commercial radio group, after the country's Takeover Panel asked it to clarify its position.

Private-equity backed Global issued a statement saying it had four options, including making an offer above 190 pence per share, bidding below that price, or walking away.

The statement followed newspaper reports saying Global Chief Executive Ashley Tabor had no intention of increasing the bid.

Britain's Takeover Panel has already given Global a March 5 deadline to decide whether or not to formally make a bid.

Global Chairman Charles Allen has told Reuters that the 190 pence preliminary offer pitched in December was a "fairly full" price, particularly given the weakening in media stocks and the outlook for the advertising sector since then.

Allen's comments came after GCap Media GCAP.L on Monday unveiled a strategic review. Shares in GCap have recently risen above 200 pence.

GCap's executive management, headed by Chief Executive Fru Hazlitt, met leading shareholders on Tuesday to go through the plan that she described as radical and realistic.

Hazlitt, two months into the job, has decided to focus on GCap's most profitable platforms, notably FM and broadband radio. Her plan includes cutting costs and dropping loss-making digital-only stations and striving to almost triple margins to between 17 and 19 percent by March 2010.

"The bit we thought was missing was the sense of a growth strategy -- what we saw was four closures and a U-turn on strategy," said Allen.

Investec Securities said in a research note Hazlitt's review "somewhat controversially 'slaughters' several previously sacred cows in an attempt to turn round a group that has significantly underperformed since inception."

PITCHING TO BACKERS

The stakes are high for both GCap and Global, which pitched its indicative bid approach just days before Hazlitt took over as chief executive on Dec. 20.

Shares in GCap had slumped from around 250 pence in August to 120 pence, before surging above 200 pence when Global's interest became public.

On Tuesday, they closed up 3.9 percent at 191-1/2 pence.

Hazlitt will spend much of this week selling her strategic plan to leading shareholders. Global said it too would meet shareholders in coming few days and then decide how to proceed.

"It's a very sensible strategy. She has been brought in and I would like to see her be given a chance to prove herself, but I understand it is not as easy as that in the City with the bid hanging over her," said Mark Middlemas, a managing partner at media planner and buyer Universal McCann, a unit of Interpublic Group (IPG.N) which bills around 15 to 20 million pounds per year on commercial radio in Britain.

Global, backed by Irish financiers Dermot Desmond, John Magnier and JP McManus, bought media firm Chrysalis's (CHS.L) radio assets last year for 170 million pounds.

Many analysts think Global, which pitched unsuccessfully for the radio assets of media group Emap EMA.L in December, will sweeten its offer.

Global was set up specifically to invest in UK radio.

Investec Securities said an offer of around 215p would have a good chance of succeeding given the risks of Hazlitt's strategy and the state of the UK economy.

"While a realistic view is that Global needs GCap to bulk up its Chrysalis Radio purchase and there are few alternatives, being a privately-run company, it can probably afford the luxury of waiting to see if economic conditions worsen and/or execution progresses," the brokerage said.

Universal McCann's Middlemas said advertising businesses were watching the bid battle closely given the disruption it could potentially create for commercial radio ad accounts.

"With Global it is a war of attrition, one side is doing something and one side is saying something," he said. (Editing by David Cowell and David Holmes)