Curbs on newspaper state ownership to be watered down

A possible buyout by Gulf-backed Redbird lies in limbo as row on press ownership rumbles on,

CURBS on foreign state ownership of British news outlets designed to block the United Arab Emirates bid for The Telegraph are in line to be weakened following an outcry from owners including Rupert Murdoch.

Officials have been warned against the “unintended consequences” of new laws if drawn too strictly by lobbyists for the media mogul and Lord Rothermere, owner of The Daily Mail.

Mr Murdoch’s holding company News Corp, which is listed in New York, is understood to be concerned that its shareholders could inadvertently breach a proposed 5pc cap on foreign state shareholdings. Both News Corp and DMGT, Lord Rothermere’s company, are also said to have protested that very strict legislation could cut them off from future opportunities for outside investment that would not involve state influence over their newspapers.

Titles owned by News Corp and DMGT, a potential bidder for The Telegraph, were vocal opponents of the Uae-backed bid from Redbird IMI. The fierce public controversy that led to the planned laws on foreign state ownership of the media have effectively killed the bid. The Telegraph is expected to go up for sale again in the coming weeks. Department of Culture officials are racing to draw up legislation after the Lords last month forced ministers to act against the takeover attempt. Redbird IMI is three quarters funded by Sheikh Mansour bin Zayed Al Nahyan, vice-president of the UAE, and there were concerns about press freedoms.

An amendment to the Digital Markets Bill is being prepared to outlaw foreign state control or influence over newspapers and news websites. However, exceptions are being prepared through secondary legislation and the details of this are the focus of wrangling.

Sources said that the Government was preparing a consultation on its plans that is expected to lay the ground for a softer regime. A source involved in the discussions said: “This is a narrow intervention meant to safeguard The Telegraph that has sector-wide consequences.”

Ministers previously told Parliament the only allowable exceptions would be for passive stakes capped at 5pc. News Corp is said to be arguing that the cap is too low, partly because US rules do not require investors to disclose stakes below 5pc. A DCMS spokesman said: “The measures are still in active development, but we are committed to ensuring that they do not have undesired effects on wider foreign business investment in UK media.” News Corp and DMGT declined to comment.

Jeff Zucker’s smash-and-grab raid for The Telegraph might have gone down as a great act of media swashbuckling, had it come off.

Instead, no less an industry commentator than Donald J Trump took the opportunity to salt the wounds of the man who made him an NBC television star on The Apprentice and then became his antagonist-in-chief as the head of CNN.

“Jeff Zucker was always a loser, people just haven’t known about it,” sniped Trump via his very own Twitter knock-off, Truth Social, following the collapse of the bid last month.

Yet Zucker, the frontman of Uae-backed fund Redbird IMI, can still walk away a winner if he and his bruised colleagues can engineer an onward sale and a quick profit.

The grudge behind Trump’s accompanying attack on The Telegraph itself was less obvious. “These were terrible investments – should have gone down the tubes years ago!” the former president wrote. On Truth Social everyone’s a critic, apparently.

For Zucker and The Telegraph, the brickbats from Trump will count for nothing. Yet the former president unwittingly stumbled into two issues now at the heart of a crisis of ownership that is approaching its first anniversary.

Firstly, and for complex reasons divorced from the strength of the underlying business, Zucker and Redbird IMI will find the line between a terrible investment and a winning one may be fine indeed. Secondly, and under the law of unintended consequences, having fought off state ownership the danger to The Telegraph remains serious.

Foreign takeover

Zucker would put his doomed relationship with The Telegraph and The Spectator magazine behind him tomorrow, if he could. But Redbird IMI must overcome a tangle of challenges in the coming weeks if it is to sell on the £600m loan to the Barclay family that it hoped to convert into ownership of the titles.

Its gamble that British politicians and regulators would allow a foreign power to fund a takeover of The Telegraph appears to have been very poorly advised.

After finally losing patience with the Barclay family over £1.2bn of loans that had been in default for years, Lloyds Banking Group seized control of The Telegraph and The Spectator on June 7 last year by sending in receivers. Goldman Sachs was handed the gavel for an auction scheduled to kick off in late October. Potential bidders were warmed up and appointed bankers of their own.

With Goldman awaiting first round bids and a critical British Virgin Islands court hearing looming, the Barclay family offered to repay the £1.2bn in full in early December. The cash was half borrowed from Redbird IMI and half directly from its main backer, the UAE vice-president Sheikh Mansour bin Zayed Al Nahyan. Lloyds was obliged to accept and

The Telegraph and The Spectator were effectively mortgaged to Redbird IMI, which immediately began down the path that ultimately led to a defeat delivered last month by the House of Lords.

State ownership of UK newspapers – except passive stakes below 5pc held by sovereign wealth funds in stock market trackers, for instance – is to be banned when the Digital Markets Bill receives royal assent around the end of this month. Some three quarters of Redbird IMI’S cash is straight out of the Gulf and so its hopes of controlling

The Telegraph have been buried in the desert. Throughout the battle, Zucker complained that attacks on the bid were being orchestrated by rival suitors who had been blindsided by Redbird IMI and the UAE’S move to derail the auction. “We were a little smarter than some of our competitors,” he said in one interview.

Now, however, Zucker and his colleagues must look to those rivals to help them out of a corner. Having lost face, they cannot lose money too.

Questions over valuation

Redbird IMI sorely needs to find a buyer ready to pay more than it did.

It swooped in with its £600m loan to the Barclay family without conducting any formal due diligence, valuing The Telegraph at £510m and The Spectator at £90m.

That means that if it were to accept less than £600m (plus whatever millions it has spent on advisers in the past few months), it could find itself on the receiving end of significant reputational damage.

While the Sheikh provided the vast majority of the capital behind Redbird IMI’S Telegraph misadventure, some £150m was drawn from Redbird Capital’s own funds.

Redbird Capital’s investors are family offices and pension funds who may not take kindly to sustaining losses on a highly unconventional deal apparently done to serve the interests of another investor and done without undertaking basic financial and legal hygiene. (Zucker staunchly maintained throughout that Redbird IMI took what it viewed as a good business opportunity). Zucker and his colleagues are keenly aware of this risk. If it is unable to recoup its investment, Redbird IMI has let it be known that it would consider “selling” the loan to Redbird Capital funds.

Independent of state petrodollars, Redbird Capital would then become owner of The Telegraph and The Spectator, alongside AC Milan and a stake in the Mission: Impossible producer Skydance Media.

There are problems with this backstop. The UAE is understood to be an investor in Redbird Capital funds beyond Redbird IMI, so any such “sale” could also bump into the UK’S new ban on state ownership of newspapers.

There might still be questions over valuation, too, and a call from Redbird Capital investors for due diligence information, which as it stands Redbird IMI could not provide. This is partly because restrictions put in place by the Government prohibit The Telegraph cooperating with the fund. Nevertheless, an in-house deal of some sort remains among the half dozen options available to the fund as it explores next steps, even though some form of onward sale at a profit would be much preferred.

If nothing else, the intense controversy over ownership of The Telegraph has highlighted its continued influence even as a post-print future races towards newspapers. Few medium-sized businesses could prompt Parliament to action so swiftly.

Nobody knows what price it might have fetched if Zucker’s rivals had been allowed to fight it out in last year’s aborted auction, and it is possible that price for the trophies might now be higher.

Some are itching to find out. Zucker has already entertained approaches in New York, including one in person from Sir Paul Marshall, the GB News co-owner whom Zucker said in an interview two months ago was “unfit to own a newspaper”.

In a note to clients last July, the media analysts Enders suggested strong profitability in 2023 could justify a valuation of £740m for The Telegraph alone, implying that a package with The Spectator could be worth £800m. In the immediate aftermath of its raid on last year’s auction, Redbird IMI won praise in US media circles for bagging the pair for only £600m.

There are arguments for a lower price, too. Suitors will sense a seller under pressure in Redbird IMI and may attempt lowball offers. The complications in buying an option to own The Telegraph, rather than the asset itself, have been made clear by Zucker’s ordeal and may depress bids, as may a lack of financial and legal information. The new laws against state ownership cuts the newspaper industry off from a significant source of international investment.

The shadow cast by the Barclay family could impose a discount, too.

They remain the legal owners as it stands, albeit prevented by law from exercising any control.

Barclay controversy

The Barclay family, led by Aidan, 68, are in a pickle. After years of infighting and debt-fuelled growth, their business empire is unravelling.

Yodel, the parcel courier which has struggled to win public affection, has been sold off and its parent company put into administration by its lender HSBC. Very, the online shopping business formerly known as Littlewoods, is afloat on a £2.6bn sea of debt, with two of its lenders having made their way onto its board in what is widely viewed a prelude to a debt-for-equity coup. Meanwhile, The Telegraph and The

Spectator remain profitable and financially stable but out of the family’s reach owing to the legal protections put in place by Lucy Frazer, the Culture Secretary, when she triggered a public interest investigation of their deal with Redbird IMI.

Management of the companies is overseen by independent directors – Mike Mctighe, Steve Welch and Boudewijn Wentink – who were originally sent in by Lloyds but kept in place by Frazer once the Barclays repaid their £1.2bn debt. When Redbird IMI formally pulls out of its takeover attempt, their role could end and Barclay family control be restored.

The independent directors’ discoveries could prove another stumbling block on The Telegraph’s road to new ownership, however. While the company was in receivership, it has been reported that the independent directors, as well as advisers and financial institutions, made reports of suspicious transactions to the National Crime Agency. The reports, required under the Proceeds of Crime Act, were triggered by the movement of large sums of money between The Telegraph and other companies controlled by the Barclay family.

While The Telegraph and its operations are not directly affected, sources said, the potential return of the company to Barclay family control, even temporarily, could trigger a cascade of damaging unintended consequences. For instance, Lloyds remains the lender of around £60m to Press Acquisitions Limited, the parent company of The Telegraph and The

Spectator. This corporate loan is separate to the £1.2bn debt repaid by the Barclay family and has never been in default.

It is understood that Lloyds made its own report of suspicious transactions to authorities as part of the receivership last year. If the Barclay family were to regain control, there would be a risk that Lloyds would feel obliged to call in the loan to avoid doing business with them. That, in turn, could pose a risk to the financial stability of The Telegraph. Lloyds declined to comment on whether it had made a Suspicious Activity Report. A Barclay family spokesman has previously said: “The accounts, including to the year ended 31 December 2022, have been fully audited and signed off by PWC.”

Media rivals

Persuading potential buyers to get comfortable with such a colourful backdrop will be among Redbird IMI’S most crucial tasks as it seeks to recoup its outlay in the coming weeks.

The onward sale is to be jointly managed by the London boutique advisory Robey Warshaw and Raine of New York, which has built a name in transatlantic sports and media dealmaking.

Robey Warshaw’s best-known employee, George Osborne, was previously an enthusiastic and bullish advocate for the Abu Dhabi-backed deal, to the occasional frustration of other advisers who sensed high political danger. Andrew Neil, The

Spectator chairman who indulged in public clash of egos with Zucker, branded the former chancellor’s work on the bid “totally cack-handed” and argued that it inspired an opposition that was the broadest coalition in British politics “since we fought the Nazis”. In a Spectator column after his defeat, Osborne coyly described his role as “working out who is going to own this magazine”.

He nevertheless continues to position himself for a role in the process alongside the more experienced Sir Simon Robey, who Redbird IMI views as its main adviser at the firm.

Raine’s Joe Ravitch is in line to play a leading role too. An Anglophile who spends every summer in London, he has become a go-to figure for foreign owners selling high profile British assets fraught with political difficulty. In the past two years he has sold Manchester United for the Glazer family and Chelsea for Roman Abramovich.

Between them, Raine and Robey Warshaw will seek to stoke a bidding war. Most of the probable participants are already known: Sir Paul Marshall, the Daily Mail owner Lord Rothermere, the local newspaper consolidator National World, the Belgian group Mediahuis and Germany’s Axel Springer all registered interest in the aborted first auction.

Of them, Marshall has been among the most active since Redbird IMI was blocked, visiting Zucker and reactivating his bid team. Media analysts believe he and his US investment partner Ken Griffin have the appetite to pay more than £600m for The Telegraph and The Spectator, but the baggage of GB News and concern at the top of the Conservatives over his political intentions present challenges.

However, all would face hurdles. Rothermere’s DMGT would be especially likely to trip over competition concerns given its significant share of the national newspaper market. In lobbying for the laws that killed off Redbird IMI’S bid it may have caused itself funding challenges, too. The Government came up with a much stricter regime than had been proposed by a crossparty group of peers led by the Conservative Baroness Stowell. It is understood the outright ban on foreign state ownership triggered considerable anxiety at Rothermere towers, despite a report in November that DMGT had abandoned plans to part-fund its bid with Qatari cash.

Britain’s other main newspaper tycoon, Rupert Murdoch, has concerns too. His News Corp empire has previously relied on Saudi investment and has limited visibility over who is buying its shares in New York. Wrangling over the details of the new law on press ownership adds yet another question mark over the onward sale of The Telegraph. The irony that two of his major opponents are now trying to water down legislation they helped prompt will not be lost on Zucker.

Murdoch thirsts after despite his 93 years. Any attempt by The Telegraph The Spectator Redbird IMI to auction it separately from will add yet another layer of complexity, however. The debt it will be selling is secured against the group of companies. Unpicking the titles should be possible in an auction, sources said, but would require cooperation between the buyers. Assistance from the Government to smooth the conversion of debt into shares as part of a transaction would be crucial too. Those discussions are under way.

With uncertainties all around, Redbird IMI’S auctioneers will hope to attract newcomers and dark horses. The Livingstone brothers, a pair of very private property billionaires, registered to bid last year, it can be revealed. They did not respond to a request for comment. The former editor Sir William Lewis abandoned his pursuit last time after being The appointed Washington chief Telegraph Post executive of by Jeff Bezos. Despite an ongoing battle with annual losses of $100m (£80m), perhaps Lewis and the Amazon founder will seek transatlantic scale alongside their turnaround effort.

Right owner, right price

The path to any such victory is narrow, as friends of Rishi Sunak used to say. The Telegraph’s independent directors are unsure of the security of their positions and their role in the onward sale. Their immediate task is to persuade Redbird IMI that cooperation will be required to secure the right owner at the right price. (Potential buyers will probably want to see the investigation commissioned by the company from the specialist law firm BCL into the suspicious activity identified in the accounts, for instance.)

Much may depend on the attitudes of Sheikh Mansour. The UAE has made no public comment on the controversy, but the recent arrival in discussions of the US lawyer Marty Edelman suggests a focus on the process among royal lieutenants.

Edelman, of the firm Paul Hastings, is a longstanding representative of the Sheikh in the West, sitting on the board of Manchester City and at the centre of tortuous plans for a soccer stadium in New York, which were finally approved last week.

Questions will surely be asked about how Aidan Barclay and Nadhim Zahawi, the former Cabinet minister who had ambitions to become Telegraph chairman, persuaded the UAE that the deal would be waved through. Zahawi declined to comment.

Even after Stowell revealed her amendment and its cross-party backing, Zucker had been assured by political advisers that the deal would not be legislated against. Those advisers included the former Ofcom chief executive Ed Richards and his firm Flint Global, and Sir Craig Oliver of the consultancy FGS Global, who was previously Lord Cameron’s No10 communications director and declined to comment.

It proved a disastrous misjudgment, although Zucker believes his biggest mistake was an 11th-hour change to the structure of the deal in January. It angered Lucy Frazer, who restarted the Ofcom investigation, delaying the process by weeks and allowing opponents to organise. Possibly more pertinently, it was possibly too clever by half and exposed a gap in the law around passive investment that ministers felt obliged to close.

Regardless, Redbird Capital has already moved on to its next, much larger target: the Hollywood studio Paramount, which it is pursuing in cooperation with Skydance Media. Redbird IMI, meanwhile, must quickly resell The Telegraph if it is to salvage its hopes of an ambitious global buy-up of media assets, potentially including Zucker’s former charge CNN. Speed matters greatly for The Telegraph as well. Like all newspapers, it is racing to build its digital future as the decay of its print past accelerates. Making big decisions and investments required to avoid disaster without a supportive long-term owner is next to impossible. Yet the next significant steps are probably some weeks away as officials and Redbird IMI attempt to establish the ground rules for a new auction. Complexities and dangers lie in every direction of a situation in which no party – not Redbird IMI, the Barclay family, The Telegraph or the Government – has complete control. Next year The Telegraph will turn 170. It has at least survived worse.

‘If nothing else, the controversy over the ownership has highlighted The Telegraph’s continued influence’ ‘Media tycoon Rupert Murdoch thirsts after The Spectator despite his 93 years’