The company, which had gone head to head with Blackstone as part of a consortium, announced today that it was no longer considering an offer.
The £1.7bn (€2.5bn) battle over UB, who own the McVities and Penguin biscuit brands, had previously seen Premier leading a team made up of Dutch firm NPD Capital and Lion Capital equity group.
But reports in the Financial Times suggest Premier was forced to quit negotiations after backer Lion Capital withdrew, taking an expected £250m (€371m) investment with it.
Unable to fund the bid alone, Premier, owner of the Branston and Ambrosia brands, confirmed that it would no longer compete to acquire the biscuit maker - leaving the way clear for Blackstone, the sole remaining bidder.
The company said: "Premier announces that discussions regarding its potential acquisition of the UK and Ireland biscuits and snacks business of United Biscuits have terminated.
"Premier continues to consider acquisitions to be an important part of its overall strategy and evaluates potential acquisition opportunities according to its strict set of acquisition criteria."
UB currently own a quarter of the British biscuit industry and in April announced a year-end profit jump to £204m (€301.7m) - up from 2004's £163m (€241m).
Analysts predict sales at the group to rise five per cent in the pre-June period and an increase of 20 per cent in business profit.