Global Radio, the owner of Heart 106.2, has been given a further three weeks to agree a deal with GCap Media, the owner of Capital 95.8.

Talks were expected to start immediately after Global made a 225p-a-share “final proposal”, worth £371 million, for Britain’s largest commercial radio group on the eve of the Takeover Panel’s “put up or shut up” deadline of 5pm yesterday.

After an approach from GCap, the Panel said in a statement issued to the market yesterday that the deadline had been extended to March 26. Global had been seeking an extension until April 2.

GCap said yesterday: “GCap will work together with Global to determine whether it will be able to make a recommendable offer.”

Ashley Tabor, chief executive of Global, added: “We are delighted that the GCap board has made it possible for Global to work towards finalising an offer that will create substantial value for GCap’s shareholders.

“Global Radio strongly believes that a combination of its brands with those of GCap will create a strong and vibrant company that will be able to breathe new life into Britain’s commercial radio sector.”

Global first approached GCap in December last year, when it proposed a deal at 190p a share, a move revealed by The Times. Last week it tabled a second proposed bid of 202p a share.

Richard Eyre, the chairman of GCap, and Fru Hazlitt, his chief executive, have spent the past two days in discussions with fellow board members and leading shareholders, including Fidelity, Schroders, DMGT and Standard Life. They were told that some leading institutional investors wanted to see the company enter takeover talks, while one source close to the process said last night that all the leading shareholders were “comfortable” for GCap to enter talks, suggesting that a formal offer would receive shareholder backing.

Standard Life Investments, which holds a 7.6 per cent stake in GCap, added its support for Global’s approach yesterday. David Cumming, head of UK equities at Standard Life Investments, said: “Due to the increased offer, we believe that it is appropriate GCap engage with Global Radio with a view to accepting the revised bid terms.”

Schroders, which has a 16.1 per cent stake in GCap and supported GCap’s board when it rejected an earlier approach by Global, was also understood to be keen to see discussions between the groups.

Fidelity, which is the second-largest shareholder, with 14.55 per cent, and Daily Mail and General Trust, which has a 14.3 per cent stake in GCap, refused to comment on their position.

Sources close to GCap credited the new strategy unveiled by Ms Hazlitt on February 11 for boosting Global’s offer.

Ms Hazlitt said that her strategy for GCap, which became known as her “defence document”, would deliver more value to shareholders than an offer from Global Radio. It involved the disposal of digital radio assets and the sale of the Xfm stations outside London. She has been in her role only since December.

Many of GCap’s leading shareholders are long-term investors that were stung by the £711 million merger of Capital Radio and GWR in 2005.

GCap shares closed up 11¾p at 211p.

Times Recommends

• ‘Lame duck’ fear for FSA as chief quits
• Storm over bailout of EU's most ailing economy
• Northern Rock to drop 100% savings guarantee