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UPDATE 2-'Not for sale': Megacable rejects merger offer from Televisa

(Adds details, Megacable comment request)

By Cassandra Garrison

MEXICO CITY, Dec 13 (Reuters) - Mexico's Megacable said on Tuesday it had rejected Grupo Televisa's offer to merge the firms' pay TV and broadband operations, opting to stick with its current business plan given that the company is "not for sale."

Televisa in November proposed merging its cable and broadband unit Izzi with its smaller listed rival Megacable, Reuters reported exclusively on Monday.

Megacable, which provides pay TV, internet and telephone services in Mexico, said in a statement it "extensively analyzed" Televisa's offer and unanimously rejected it on Dec. 8. Televisa was notified of the decision on Monday, the company said.

"The business plan currently approved by said board offers better long-term prospects for Megacable and its investors, considering that Megacable is not for sale," the firm said.

Megacable did not immediately respond to a request for comment on whether it was open to further talks

Shares of both companies surged earlier on Tuesday after the offer was initially reported, with trading eventually suspended by regulators. Televisa shares were still up 8.12% after trading resumed and Megacable held gains of more than 13%.

Mexico's largest broadcaster said in its own statement Tuesday that Megacable's rejection noted that its board chairman is the only person empowered to deal with this matter. Televisa's Nov. 14 offer letter, seen by Reuters, was addressed to Megacable's board of directors.

Televisa said it will continue to try to engage with Megacable although the latter firm's statement gave no hint that it was open to further talks.

"We believe that the market clearly understands the industrial logic of this transaction, considering today's market reaction to press reports regarding the proposal," Televisa said.

Televisa’s stock-for-stock offer would have resulted in Megacable’s shareholders owning about 45% of the merged company with Televisa at about 55%, Televisa's offer said.

Additionally, Televisa offered Megacable shareholders a 14.8 billion peso ($744.94 million) special dividend at the deal's close that would either be financed by third-party lenders or its own cash on hand, the letter said. Megacable would have remain publicly listed as the entity surviving the merger. (Reporting by Valentine Hilaire and Cassandra Garrison, additional reporting by Noe Torres; Editing by Isabel Woodford and Alistair Bell)