Lord Rothermere has pulled out of the bidding for The Telegraph amid concerns Labour would object to a takeover.
His holding company DMGT, owner of The Daily Mail, said the change of government meant it would “face a heightened risk of a protracted regulatory process if we were to win the auction”.
It said: “DMGT has the capital and resources to make The Telegraph a long-term global success, but we cannot justify the required investment given the changing legal and regulatory backdrop.”
A DMGT takeover of The Telegraph would also have faced close scrutiny on competition and media plurality grounds, regardless of the government of the day.
In anticipation of opposition, DMGT had recruited Tory-linked lobbyists to its bid. However, it appears to have determined that it has no chance of success under Labour following the snap election.
Lord Rothermere’s interest in The Telegraph has faced financial and regulatory hurdles from the start. DMGT is indebted and under pressure from declining circulation and print advertising sales, and faces a challenge in building a large-scale digital subscription business alongside its free tabloid website.
The media group complained that new laws against foreign state investment in news publishers were “overly restrictive, and could curtail our ability to raise capital for our news publishing and other media businesses – both now and in the future”.
They were brought in during the final days of the Conservative government to block the attempted takeover of The Telegraph by RedBird IMI, an investment fund linked to the rulers of the United Arab Emirates. Lord Rothermere himself held discussions with Gulf investors as he sought to finance a bid.
RedBird IMI, which acquired sway over The Telegraph and The Spectator magazine in a complex debt deal with the Barclay family last year, is now running an auction process as it attempts to recoup its £600m outlay. That deal valued The Telegraph at £510m.
DMGT had been viewed as one of the frontrunners, alongside GB News owner Sir Paul Marshall. Local newspaper group National World has also expressed an interest, as well as foreign publishers and financial investors.
RedBird IMI has claimed there is “extremely strong” interest in the auction, which is being run by bankers at Raine.
First-round bids are expected this month, paving the way for a deal later in the summer.