Telegraph onward sale explored if Abu Dhabi fails press freedom test
MOVES towards an onward sale of The Telegraph are under way as the attempted takeover backed by Abu Dhabi risks months of wrangling over press freedom.
Redbird IMI, the fund that last year swooped to acquire The Telegraph out of receivership in a complex debt transaction with the Barclay family, is still pursuing ownership.
However, it is understood discussions about how an alternative buyer could be secured have been held by other interested parties. Its own planned takeover is currently under investigation by Ofcom over the potential risks to press freedom of statebacked ownership. A report is due to be delivered to Lucy Frazer, the Culture Secretary, before the end of the month.
Deal insiders believe Ms Frazer is most likely to trigger a further “phase 2” investigation by the Competition and Markets Authority (CMA) lasting 24 weeks or more and would test the patience of the UAE.
Such scrutiny could prompt Redbird IMI to sell The Telegraph before it concludes, sources said. Around two thirds of deals subjected to a phase 2 inquiry fail to go through. By voluntarily selling up early, Redbird IMI may stand a better chance of recouping the £600m it paid for The Telegraph and The Spectator magazine.
A Redbird IMI spokesman said the fund had not had any discussions about an onward sale. “Redbird IMI, which is solely responsible for any potential sale of The Telegraph, has not had any discussions with anyone about a sale. Any suggestion to the contrary is categorically false.”
Redbird IMI could commission The Telegraph’s independent directors, who were first appointed by Lloyds Banking Group when it sent in receivers but are now answerable to Ms Frazer, to run any new sale. It could also seek to run the process itself. The Barclay family, who lost control in June following a dispute with Lloyds over £1.2bn of overdue debts, would not be involved.
They are under pressure after borrowing the full sum in two tranches from Redbird IMI, in exchange for The Telegraph and The Spectator, and directly from Abu Dhabi, which took security over their online shopping business Very. That loan is expected to rapidly accumulate interest amid tough trading conditions for Very.
DMGT, the owner of the Daily Mail, and Sir Paul Marshall, co-owner of GB News, would be expected to line up to bid if The Telegraph went on sale again. It is understood that representatives of Lord Rothermere, the owner of DMGT, have already made approaches to the Government about such a scenario.
His bid could raise competition concerns given he already controls the Mail titles, Metro and The i.
DMGT would be likely to argue that market share in print newspapers is an out-of-date way to assess the news market as part of an increasingly digital media landscape.
Redbird IMI has not given up, however. Jeff Zucker, the former CNN chief leading the bid, has travelled to London this week for talks with Ofcom about protections intended to protect editorial independence from Abu Dhabi, which has provided three quarters of the purchase price.
Redbird IMI is offering legally binding undertakings that the UAE will have no involvement in the running of
The Telegraph. It also plans to create an editorial trust of five public figures who would monitor compliance with the undertakings and approve appointment of an editor. It has not named the proposed members of the trust.
Already the undertakings have revealed potential problems with the intertwining of Redbird, a US private equity firm, and IMI, Abu Dhabi’s media investment vehicle. For instance, Rani Raad, a former senior CNN colleague of Mr Zucker’s, was named chief executive of IMI in September.
At the same time he remains an operating partner of Redbird and president of Redbird IMI.
Redbird IMI, which has been advised on regulatory matters by Ed Richards, the former chief executive of Ofcom, is said to be aware that Mr Raad’s triple role is not compatible with the undertakings it has offered and plans to clarify his involvement. Deal insiders believe that in regulatory terms the undertakings Redbird IMI has offered should satisfy Ofcom, perhaps with some further strengthening. Ofcom said the public interest could be protected by an editorial board and legally binding undertakings despite ample evidence that comparable protections for The Times, put in place when Rupert Murdoch took over in 1981, were not adhered to or enforced.
If accepted, responsibility for the enforcement of Redbird IMI’S undertakings, which would be legally binding under the Enterprise Act, would fall to the CMA. If it decided to investigate and found a breach it could order The Telegraph to be sold. Regulators tend to resist “behavioural” remedies that create such burdens for them, however.