GCap rejects Global approach

By Gavin Haycock

LONDON (Reuters) - GCap Media Plc GCAP.L, Britain's largest commercial radio company, said on Monday it rejected a 313-million-pound ($617 million) bid approach from privately owned Global Radio despite the hefty premium offered by the acquisitive UK group.

GCap said the indicated price of 190 pence per share in cash significantly undervalued the company and that it wants to give new Chief Executive Fru Hazlitt a chance to map out her plans.

Shares in GCap jumped as much as 53 percent and were trading up 49 percent at 180 pence by 5:28 a.m. EST.

Despite the strong gains and several analysts saying GCap was firmly in play, the shares did not go above 184-3/4 pence.

Panmure Gordon analyst Alex DeGroote said counter offers were likely even though the multiple Global was putting on GCap "looks rich" relative to the 422 million pound price media group Emap EMA.L received last month for its radio assets.

Global said it was now reassessing its position.

GCap is expected to be canvassing the views of its leading shareholders, particularly as weekend press reports said Global's approach was rejected a few days before Hazlitt was appointed as GCap's new chief executive on December 20 and not made public until after Global revealed its hand at the weekend.

"We believe that this is a (public relations) disaster for GCap Media which, given the level of the possible offer, should have presented it to its shareholders," said Ingenious Securities analyst Patrick Yau.

"Although we suspect that some may be willing to allow Hazlitt more time to settle into the CEO role, others may take a harder line and question why such a material event was not made public sooner," he added.

The bid by Global, a radio sector investment vehicle headed by former ITV (ITV.L) Chief Executive Charles Allen, was made last month around the time Global lost out in the bidding for the radio assets sold by Emap.

Global had been in the running with a bid of around 400 million pounds, but was beaten in the auction for the company's radio assets by German publisher Bauer.

MERGER SAVINGS

Analysts speculated at the time that Global, which last year bought the Chrysalis radio assets, might turn its attention to a company such as GCap.

"Global can afford to pay the high premium due to significant synergies and cost saving opportunities in putting the two companies together," said Numis Securities, referring to the stations both own in London and Birmingham, central England.

"We would not underestimate the challenges of turning around GCap on a standalone basis. Moreover, we believe a cash bid in an uncertain advertising environment for a business facing structural challenges has considerable merit," the broker added.