The two rivals face disqualification from the bidding because of the likelihood that moves by either company would be subject to a lengthy Competition Commission enquiry into their newspaper interests.
Merchant bank Lazards, which is shortly expected to begin an auction for the Hollinger-owned newspapers, will be pushed into a quick sale of the papers, which include the Daily and Sunday Telegraph, because of Hollinger's £70m bond debts that need to be paid next year.
The news will come as some small relief to Lord Conrad Black, who was forced to step down as CEO of Hollinger last week, has himself dismissed any talk of Richard Desmond buying the Telegraph titles.
At the weekend Lord Black told the Observer: "He's [Desmond] not at the front of the queue. I consider it an implausible scenario."
Desmond's problem is that he already owns two national newspapers in the Daily Star and Daily Express. The same is true of Associated Newspapers owners DM>, which owns the Daily Mail and Mail on Sunday and the Evening Standard.
Despite these obstacles, Desmond is moving ahead with putting a bid together for the Telegraph group. The Sunday Times reported that Desmond has lined up two British banks, HBOS and HSBC, to provide financing.
Other potential bidders include former Telegraph managing director Stephen Grabiner and former Mirror Group chief executive David Montgomery.
Lord Black was last week forced to stand down as CEO of Hollinger after disclosures that he accepted $32m in unauthorised payments. On Friday four directors of Hollinger's audit committee were forced to resign by the board after failing in a bid to have Lord Black removed as chairman.
As well as the Daily Telegraph, Hollinger owns the Chicago Sun-Times and the Jerusalem Post.
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