The new Communications Act has paved the way for radio mergers

A marriage between the two would create an enlarged group with a market value of around �710m, bringing Capital FM and Classic FM under the same roof.

The companies gave a joint statement after recent speculation in the press that a deal was imminent.

"A further announcement will be made as appropriate in due course," the groups said on Sunday.

New rules

Capital has made no secret of its desire to expand through acquisitions - it already owns Capital FM, Century FM, Capital Gold and Xfm.

Regional stations such as Red Dragon in Wales and BRMB in the Midlands also come under its umbrella.

The company claims to broadcast to over 50% of the UK population.

Meanwhile, potential partner GWR commands a larger audience share than any other commercial radio group in the UK.

Its stable of radio stations includes Classic FM as well as 33 local broadcasters such as Essex FM, Leicester Sound and Trent FM.

Mergers within the industry have been widely expected following the introduction of the Communications act, which relaxed the rules governing tie-ups between radio companies.