The talks for an all-share merger are understood to be at an advanced stage with the result expected to be announced next month.
At 11:15, Capital's shares were up 6.68% or 29.25p to 459.25p, while GWR was up 6.1% or 14p to 278.5p.
Capital Radio, owner of London's 95.8 Capital FM and alternative music station Xfm, and GWR, the nationwide broadcaster of Classic FM, will become the largest radio group in the UK if the talks are successful.
However, in a joint statement released by Capital and GWR the two, said: "These discussions are ongoing and may or may not lead to a transaction."
The two broadcasters own 55 radio stations between them. A merged company would create a major competitor for rivals Emap, owner of Kiss and Magic FM, and Chrysalis Group, owner of Heart radio, Capital's major rival.
The merger would also create a combined business worth 40% of the radio advertising market in the UK.
Analysts claim that the companies could make savings of tens of millions from a merger. Talks of radio mergers have been on the cards since the Communications Act came into force in July 2003.
In response to the merger news, advertiser body ISBA that it was studying the emerging news with interest.
"As the industry is aware, advertisers tend to be concerned over any moves which might reduce levels of competition in the media markets for their budgets.
"ISBA notes that, combined, GWR and Capital would control some 40% of the national radio advertising market. This is a significant market share in radio -- a very important strategic medium for advertisers," ISBA said.
ISBA said will be analysing in detail the implications of such a merger and would be keen to input its members' views into any Office of Fair Trading investigation or Competition Commission inquiry that may be launched.
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