Advertising distribution company Digital Generation Inc (DG) (DGIT.O) recently rejected a takeover bid from rival Extreme Reach Inc of more than $20 per share, a source familiar with the situation said on Wednesday.

The offer, backed by private equity firm Providence Equity Partners according to the source, would have been worth more than $550 million based on DG's outstanding shares.

Reuters first reported on March 25 that DG had hired Goldman Sachs Group (GS.N) to find a buyer and has drawn interest from several private equity firms and rival companies, citing a separate source familiar with the matter.

Parties that have evaluated a potential purchase of DG, formerly known as DG FastChannel, included buyout firms Hellman & Friedman, Thoma Bravo, Extreme Reach backed by Providence Equity Partners, and TA Associates, the source had said at that time.

Another private equity firm, Bain Capital, is also a suitor for DG, a third source familiar with the situation said this week.

DG has rejected the offer from Extreme Reach, citing potential antitrust concerns, and excluded the company from the ongoing sale process, the first source said.

All these firms have declined to comment and DG did not have immediate comment.

Shares of DG jumped 26 percent to close at $12.13 on Nasdaq after news of the rejected offer was first reported by Bloomberg.

This is at least the second time in a year that the company has sought a buyer, sources told Reuters previously.

DG's market value, which approached $900 million just a year ago, has plunged to as low as $240 million, hit by its costly acquisition of digital advertising company MediaMind in June and lower ad volumes amid increased competition.

Irving, Texas-based DG helps advertisers engage with consumers across television and online media, while delivering ad campaigns.

The company said it helps more than 11,000 global advertisers and agencies connect with target audiences through TV stations and Web publishers in 75 countries.

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