The corporations of Newcastle and Gateshead colleges could not find enough common ground. They carried out a joint feasibility study in early spring.
Both have ruled out further merger talks but are considering co-operative ventures which are increasingly applied in industry. Chris Hughes, principal of Gateshead, said: "Look at the big airlines, they have strategic arrangements. British Airways and American Airlines did not merge but have powerful partnerships with joint ticketing."
The future, he said, belonged to "robust strategic alliances rather than dissolution of college corporations". It was important to focus on customer need rather than going through internal upheaval.
Eyebrows were raised in the North-east when the proposal was published by the colleges. One Geordie in a senior national FE position said this week: "I thought it was a complete non-starter. People in Newcastle talk about 'crossing the water' to Gateshead in most disparaging terms," he said.
The proposal was expected to trigger a new phase of FE mergers. Mr Hughes and Mike Rowath, principal of Newcastle, had said in a joint statement at the time that despite their enormous successes "energies have been diverted by unnecessary competition".
They added that "in the light of Government funding constraints, changing customer expectations and the need for investment, the time may be ripe to consolidate the gains achieved over the years".
Both had been highly entrepreneurial, building a range of nationally-acclaimed initiatives such as Learning World - attracting shoppers and workers in the MetroCentre into education - and the Centre for the Performing Arts at the Tyne and Wear Theatre.
The new college would have commanded an annual budget of about Pounds 50 million and would have run courses for more than 26,000 students. It would also have had one of the largest distance and open learning operations, targeted to meet the needs of industry in Europe.
Already, the Learning World - nicknamed "Courses R' Us" - has been drawn into the pilot for the University for Industry, Chancellor Gordon Brown's machine to kick-start new training for industry (see story above).
Mr Hughes believes that the merger mania which has long been expected to sweep the nation will not now happen. "I think it will be the same with FE and HE mergers. Instead of the emotive debates about whose mission is uppermost in the proposals, the future belongs to highly strategic partnerships."