The Southampton Education Trust consortium lost out to Oasis, a Christian charity, even though the council's assessment concluded the trust was more likely to raise standards. A survey of parents also favoured the trust.
Mr Denham, who is a Southampton MP, released a joint statement with fellow Southampton Labour MP Alan Whitehead. They said: "The Tory council has decided to ignore the public consultation and the advice of its own officers and snub the city's major employers who had committed themselves to help raise school standards."
The decision is expected to save the council money. Peter Baillie, the member for children's services on the council, refused to give the total estimated figure, but said money had not been the most important factor. "Oasis has a proven track record, already running five academies across the country," he said.
Opposition councillors are forcing the council to reconsider and justify their decision.
The two new schools will replace four schools with falling pupil numbers from September 2008. One, Millbrook community school, is severely underperforming with just 13 per cent of pupils achieving five good GCSEs including English and maths last year, compared to a national average of 45 per cent.
Ed Balls, the Children, Schools and Families Secretary, this week made changes to academy funding, abolishing the need for schools, colleges or universities to find pound;2million before becoming a sponsor.
Funding agreements for five new academies had been signed. They are Brunel academy in Bristol; John Cabot academy in Bristol; Shireland Collegiate academy in Sandwell, West Midlands; George Salter Collegiate academy in Sandwell; and St Michael and All Angels academy in Southwark, south London.