In this paper we consider nonlinear interaction between gravitational and electromagnetic waves in a strongly magnetized plasma. More specifically, we investigate the propagation of gravitational waves with the direction of propagation perpendicular to a background magnetic field, and the coupling to compressional Alfvén waves. The gravitational waves are considered in the high frequency limit and the plasma is modelled by a multifluid description. We make a self-consistent, weakly nonlinear analysis of the Einstein-Maxwell system and derive a wave equation for the coupled gravitational and electromagnetic wave modes. A WKB-approximation is then applied and as a result we obtain the nonlinear Schrödinger equation for the slowly varying wave amplitudes. The analysis is extended to 3D wave pulses, and we discuss the applications to radiation generated from pulsar binary mergers. It turns out that the electromagnetic radiation from a binary merger should experience a focusing effect, that in principle could be detected.