The second attempt to buy the supermarket giant Sainsbury's in six months collapsed today.
Qatari-backed investment vehicle Delta Two - the retailer's largest shareholder - said it was "not in the best interests" of its stakeholders to proceed with its £10.6 billion proposal.
Delta Two has been attempting to raise an extra £500 million in financing for its bid but its efforts to raise cash have been hampered by the credit crunch in debt markets.
The end of the talks comes after a previous takeover approach by a consortium of private equity firms foundered earlier this year.
Delta Two is backed by the Qatar Investment Authority (QIA), whose chief executive is Sheikh Hamad bin Jassim bin Jaber al Thani - Qatari prime minister and a member of the country's royal family.
The investment vehicle first made its approach in July and Sainsbury's agreed to open its books in September.
But the deal has now become the latest victim of the credit squeeze as Delta Two said since its original approach "the required funding and the cost of capital has increased significantly, which has adversely affected the investment case".
The decision also comes amid reports that the QIA was not prepared to provide the extra £500 million needed by Delta Two for the bid in the tight credit conditions.
Sainsbury's chief executive, Justin King, who has led a recent revival in fortunes for the UK's third biggest supermarket chain, said the interest reflected the success of the group's recovery strategy.
But the impact of the withdrawal seems set to take its toll on the group's share price, which has been buoyed by the prospects of a takeover.
Martin Slaney, head of spread betting at GFT Global Markets, said: "Our indicative open for Sainsbury's shares this morning is for a fall of around 15%, given the withdrawal of the Qatari bid."Reuse content