Airtours said it was still confident its deal would be cleared after the four-month investigation by Brussels, and that it would then be able to rebid.
However, it decided to lapse its bid as it had been unable to satisfy the European Commission that the takeover would not lead to an oligopoly in the UK package holiday market that could work against the public interest.
Under Takeover Panel rules, Airtours is prevented from bidding for First Choice again within 12 months. But Airtours is hoping the Panel will consent to a change enabling Airtours to come back with another offer when the EU investigation is completed in October.
In the meantime, First Choice has 21 days to persuade shareholders to support its preferred option of a pounds 1.5bn merger with Kuoni. Airtours said yesterday it had no intention of bidding for the combined Kuoni-First Choice if the merger goes through.
One institutional shareholder in First Choice said: "We will do nothing until the Takeover Panel decision. We always said the Kuoni deal was fine, but the Airtours offer was better." First Choice shares fell 24p to 181p, below the 188p value implied by the merger with Kuoni. Airtours shares dipped 2p to 517p.
Mr Crossland expressed disappointment at the prospect of missing out on First Choice for a second time after failing with a bid in 1993. But he added: "This is a deal I would have liked to do. But there isn't just First Choice in the world." Ian Clubb, chairman of First Choice, said he thought the EU would not clear the Airtours offer.
Airtours yesterday reported first-half losses of pounds 27.3m, up from pounds 23m. In current trading, bookings for this summer are 3 per cent up on last year. Winter bookings are up 4 per cent.
Outlook, page 21