GUILDERLAND — The credit crunch has foiled Trans World Entertainment founder Robert Higgins’ bid to buy the music and video retailer and take it private.

The Guilderland-based Trans World announced late Tuesday that Higgins, the company’s chairman and chief executive, had withdrawn his offer to buy the business for $5 per share. Higgins, who had partnered with Los Angeles investor Bryant Riley to pull off the deal, cited poor credit conditions as a driving factor behind his withdrawal.

“It doesn’t make sense to take the company private. The cost is just too much,” said Trans World Senior Vice President and Chief Financial Officer John Sullivan.

Since May 2007, a special committee of independent directors had been looking at selling Trans World, which has been struggling due to slumping music sales and heightened competition from digital music services. News of the scrapped takeover sent Trans World’s stock into a tailspin, falling 25.38 percent to $2.44 per share by the close of trading Wednesday. Its stock price was $14.59 per share three years ago.

The withdrawal leaves Trans World with no other prospective buyers, either from management or third parties. And with the retailer lacking any large rivals to court it, the outlook for other suitors is hazy.

Higgins, who founded the retailer in 1972, told Trans World directors that increased costs and burdens of debt financing made his offer unfeasible to carry out. He hoped he could make the company more profitable by eliminating the costly legal expenses stemming from operating on Wall Street. Higgins took Trans World public in 1986, with its 1.6 million shares selling for $16.50 each.

Higgins’ acquisition bid had angered minority investor Sherwood Investments Overseas in Orlando, Fla. Sherwood said it would top Higgins’ bid by offering $7 per share.

Trans World had 812 stores nationwide by Feb. 2, the end of its fiscal year. During its 2007 fiscal year, Trans World swung to a net loss of $99.4 million, compared to a net income of $11.7 million. Sullivan said Higgins’ withdrawal will not affect store operations.