Capital Radio broadcaster GCap Media has said it had rejected a revised takeover approach valuing the company at £332.9 million.
GCap said the latest proposal from Heart and Galaxy owner Global Radio fell short of the value that it believes will be created through a turnaround plan recently announced by new chief executive Fru Hazlitt.
The UK's largest commercial radio broadcaster rebuffed a 190p-a-share approach from Global in January, before receiving the new 202p-a-share offer.
Global has until Wednesday, March 5 - the "put up or shut up" deadline imposed by the Takeover Panel - to declare whether it will make a formal offer for GCap.
The statement said the GCap board consulted with major shareholders before making its decision.
GCap added: "It believes that this revised proposal significantly undervalues the company because it does not reflect the value that would be created by implementing the strategy of the new chief executive, Fru Hazlitt."
The former Virgin Radio boss has vowed to boost advertising at Capital, by ditching its previous policy of broadcasting no more than two adverts in a row.
The group-wide plans will also see cost savings of £8.8 million a year achieved through disposals and restructuring, as well as profit margins of up to 19% achieved by March 2010.
Ms Hazlitt's shake-up has been seen as a defence strategy against a takeover by Global Radio.
GCap, which also owns Classic FM, said today that the advertising market remained stable, with current trading in line with company expectations. Total like-for-like revenues in February are set to be up by 4%, with radio advertising ahead 7% year-on-year.
Global - backed by Irish racing tycoons John Magnier and JP McManus - has plans to become a powerful force in commercial radio in the UK after snapping up Chrysalis Group's radio stations last year in a £170 million deal.
The company was created specifically as an investment vehicle to buy the radio stations and plans to use Chrysalis Radio - parent of Heart and Galaxy - as a platform for further expansion in the sector.
It is also said to be in the running to acquire SMG's Virgin Radio.
GCap, which has around 30% of the total commercial radio industry, was formed from the merger of Capital Radio and GWR in 2005.
Patrick Yau, an analyst at Ingenious Securities, said Global may need to pitch a new bid in the 210-220p range.
He added: "We suspect that Global may be stretched to come back with a higher offer and that GCap may have just done enough to stave off a hostile bid - whether it can grow the business from here is another matter.