US investment group RedBird Capital has pulled out of a deal to buy the Daily and Sunday Telegraph for £500m.
RedBird had a previous attempt to buy the Telegraph rebuffed by politicians as it was majority-funded by Abu Dhabi's IMI group - which is owned in turn by the Abu Dhabi royal family.
A law change meant that foreign sovereign wealth funds could take a maximum stake of 15% in newspapers or periodicals.
The new bid complied with that rule, but it is understood that the government intended to submit the deal to regulatory review.
A spokesman for the group said: "RedBird has today withdrawn its bid for the Telegraph Media Group.
