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Future said that the terms of the deal allowed it to walk away if the competition authorities decided to get involved. However, it is believed that Future had not expected the intervention when it arranged the deal in February.

The OFT yesterday referred the case to the Competition Commission, expressing concern that the deal could concentrate the supply of computer games magazines in the UK in Future's hands.

Future is already the biggest computer games publisher in the UK and Highbury is the next largest after the Bath-based firm.

Future's computer games portfolio includes Edge, PC Gamer, PC Zone, the Official PlayStation2 Magazine, PlayStation World and Xbox Gamer, while Highbury owns games magazines including Powerstation, Play and Xpert.

Future's unexpected withdrawal could be down to unrest among the company's shareholders about the deal, which involves buying Highbury's £64.9m debt as well as offering Highbury's shareholders £31.6m in Future shares.

Future chief executive Greg Ingham said: "Following Future's statement yesterday noting the Office of Fair Trading's announcement, Future believes that it would not be in the interests of shareholders to pursue further a possible acquisition of the issued ordinary share capital of Highbury."

As of February 1, Future's major shareholder was Schroders with 21.2%, followed by Fidelity with 9.5%. Fidelity has a record of intervening in media companies it holds shares in, not least when it secured the removal of Carlton chairman Michael Green from ITV after the merger between Carlton and Granada.

The deal puts an end to Future's recent spate of acquisitons, which have been fuelling its growth of late. In December, Future acquired What Laptop? from Crimson Publishing, as well as Beach Publishing, which produces Junior, Junior Pregnancy & Baby and Wedding Day. In January it acquired A&S Publishing Company, owner of titles including Classic Ford, Mini Magazine and Retro Cars, for £5.95m.

Highbury also finalised the sale of its local publications business to Archant for £6.1m in March.

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