The decision not to proceed came at the end of a directors' meeting aimed at bridging the gap between the two sides. Hollinger, which had proposed to group its media interests under Mr Black's US vehicle, American Publishing, is believed to have favoured a price of about 460p a share for the 41 per cent of Telegraph it does not own, a level supported by an independent committee set up at American Publishing.
But independent directors of The Telegraph held out for 520p a share. Under the terms of the restructuring, first proposed in February, independent committees at both American Publishing and The Telegraph had to recommend any offer.
Analysts warned of a likely drop in the share price of The Telegraph, which had risen to as high as 449p last week from about 370p in early February, on speculation that a formal offer was forthcoming. The shares lost some ground in recent days, on growing fears the reorganisation plans would be shelved. They closed last night at 439p, down 1p on the day, ahead of news the offer had been abandoned.
Under the proposed restructuring,Telegraph, a 25 per cent stake in Fairfax Holdings of Australia and a 15 per cent share in the Canadian publishing company Southam would have been placed under Mr Black's US holding company. A drop in the share price is likely to further anger City investors, with whom Mr Black has a rocky relationship. Just prior to joining the circulation price war in the UK newspaper industry last spring, his company placed Telegraph shares with institutional investors. The shares plummeted from the 550-600p level to below 350p a few weeks later, when the cover prices of the Daily Telegraph and the Sunday Telegraph were slashed. In the aftermath, Mr Black and the brokers Cazenove parted company.
More recently, Mr Black enraged some minority shareholders by telling the Independent on Sunday that the offer for Telegraph shares would be "nowhere near 500p". Investors said Mr Black should not have negotiated through a newspaper.