Their decision to cancel the bid follows a US court ruling preventing Black from selling his stake in the company.
However, the brothers are still considering submitting a bid for Hollinger's operations to its investment bank Lazards, which has already received offers from Daily Mail & General Trust and Richard Desmond's Northern & Shell.
Speculation is also mounting that the US investment company The Carlyle Group is about to table an offer for Hollinger. The group's European chairman is the former prime minister, John Major. The rival venture capital groups Apax and Candover have already made offers and Len Sanderson, the former managing director of Telegraph Sales, is acting as an adviser on the Apax bid.
Northern & Shell this week sold off Fantasy Publications, its adult magazine division, for around £20 million in a move that has widely been interpreted as an attempt by Desmond to win respectability ahead of the scrap for ownership of the Telegraph.
Forty-five titles, including Readers' Wives and Asian Babes, were sold to Remnant Media, run by Simon Robinson, a former Mirror Group Newspapers executive.
Desmond will also use his joint ownership of the Westferry printworks as a bargaining chip. The Telegraph Group's contract to print its newspapers at the plant expires in 2009 and Desmond has indicated this won't be renewed if a rival bid succeeds.
"We're sitting and watching things with what we believe is a trump card in Westferry," a spokesman for Desmond said.
Lazards has concluded that current bids for either Hollinger's total assets or Telegraph Group are inadequate and may open a second round of bids to close in the third week of March. Bids for Hollinger are expected to exceed £1 billion, which may count against bidders solely interested in the Telegraph Group, valued at around £500 million.
THE RUNNERS AND RIDERS
Richard Desmond 5/4
Daily Mail & General Trust 5/2
Barclay brothers 5/1
Chicago Tribune 16/1
Collins Stewart 16/1
Source: Cantor Index.