The OFT referred the deal to the Competition Commission - a decision that KM Group Chairman Geraldine Allinson described as "completely unreasonable".
She said: "The acquisition would have been a good opportunity for our business. We have invested a huge amount of time on this project over the last few months.
"The costs and time required for a full Competition Commission review would be completely unreasonable for a business of our size and for a deal of this scale."
KM Group had attempted to create a stronghold in the Kent area with the acquisition of Northcliffe Media subsidiary Kent Regional News and Media.
It followed a plea by regional newspapers for the OFT to relax rules on media ownership to allow publishers to hold regional monopolies in a bid to increase newspapers' competitiveness against new media.
The OFT had responded by stating that it was up to publishers to "test the water" with potential mergers.