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Ministers have set out strict rules preventing Abu Dhabi-backed RedBird IMI from exerting any influence over the Telegraph newspaper while regulators probe its offer to take over the wider Telegraph Media Group.
Culture secretary Lucy Frazer used a regulatory order on Thursday to give Ofcom and the Competition and Markets Authority the chance to vet the deal given concerns over press freedoms. The decision to intervene in the sale of the right-leaning newspaper heaps uncertainty over the ownership of the UK broadsheet in the run-up to the next general election.
Until regulators complete their probe, RedBird IMI will be prevented from taking control of the group through a complicated debt-for-equity swap.
The terms were set out in an interim enforcement order lodged in parliament on Friday using a statutory instrument.
The order issued by Frazer said that while the deal was vetted, ownership of the Telegraph Media Group could not be transferred without her consent, nor could there be any change in the organisational structure of the group or removal of “key editorial staff” from their positions without her approval.
Ofcom on Friday published an invitation to comment on the public interest test for the Telegraph Media Group deal.
Frazer has asked Ofcom to report on whether this transaction could raise public interest concerns in relation to the need for accurate presentation of news and the need for free expression of opinion, given the risk of influence by Abu Dhabi over the newspaper.
The future of the UK broadsheet has been in doubt since Lloyds Banking Group put the group into receivership this year, after the previous owners, the Barclay family, accrued £1.1bn of debt. RedBird IMI’s has offered to repay the debt owed by the family.
RedBird IMI and the Barclay family were on Friday in the process of signing the final documents and transferring the money into an escrow account to pay the debt owed to Lloyds.
The debt repayment, which has not been subject to the regulatory oversight, is expected to complete on Monday.
At that point, technical control of the group is passed back to the family as the group leaves receivership. Lloyds will receive an unexpectedly large windfall as all the debt is paid off.
The Spectator magazine is also not part of the regulatory order as a separate media company that does not fall under the same rules as a newspaper.
One person close to the deal said that RedBird was not planning to swap its debt for equity in the magazine while it waited for regulators to scrutinise the wider deal.
Redbird IMI, which is run by former CNN boss Jeff Zucker but majority owned by an Abu Dhabi fund, has already promised to maintain the Telegraph’s editorial independence. The group will also not complete any deal until approval is given by the government.
