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UK culture minister Lucy Frazer is poised to order a probe on public-interest grounds of the proposed takeover of Telegraph Media Group by Abu Dhabi-backed RedBird IMI, in a move that could hold up the sale of the British broadsheet.
Frazer said she had concerns over the potential for influence over the Telegraph editorial operations, pointing to the ownership of IMI by a member of the UAE government. RedBird IMI is a joint venture between US-based Redbird Capital and International Media Investments, the investment vehicle backed by Manchester City owner Sheikh Mansour bin Zayed Al Nahyan of Abu Dhabi.
She cited “public interest considerations” related to the “intended loan repayment by the Barclay family and the planned acquisition of Telegraph Media Group by RedBird IMI”.
RedBird IMI, she said, had “links to media organisations that have been critiqued for partisan views and . . . there may be an impact on the plurality of views of newspapers in the UK”. IMI owns broadcasting businesses with a presence in the UK such as Sky News Arabia.
She said these concerns “warrant further investigation”, and was “minded” to issue an intervention notice on the basis of public interest grounds specified in the Enterprise Act.
Frazer’s concerns were made in a letter to Lloyds Banking Group, the Barclay family — who previously controlled the Telegraph until their £1.1bn debt owed to Lloyds propelled the newspaper group into receivership — and RedBird on Wednesday morning.
The culture secretary has been lobbied by Conservative MPs over the proposed deal in recent weeks given their concerns over the risk to national interests of a company backed by Abu Dhabi money owning a UK newspaper that has long backed centre-right causes.
A decision to vet the deal through a public interest intervention notice (PIIN) will lead to an investigation by regulators Ofcom and the Competition and Markets Authority. While Frazer said she had not taken a final decision on intervention at this stage, the move now makes a formal probe highly likely, according to those familiar with the process.
Lloyds, the Barclay family and Redbird IMI, which has pledged to protect the editorial independence of the newspaper group, have until Thursday afternoon to respond further to the letter.
Redbird IMI is now planning to offer further assurances to ministers to ensure the independence of the newspaper group, potentially including a legally separate structure and other strengthened governance measures, according to a person familiar with discussions.
RedBird Capital will take over management and operational responsibility for the titles under the leadership of RedBird IMI’s chief executive Jeff Zucker, the former CNN boss.
The joint venture said IMI will be a passive investor only. The group said it would co-operate fully with any regulatory review.
The Barclay family would use the money from Redbird IMI as well as IMI directly to pay down the £1.1bn they owe to the bank. A second phase of the deal would see the debt converted into equity ownership of the Telegraph for Redbird IMI.
The UK carried out a similar intervention in the takeover of Northern & Shell Media Group by Trinity Mirror in 2018, and the sale of a 30 per cent stake in the Evening Standard and the Independent to a Saudi investor. Both went through even after a PIIN.
Frazer said that public interest considerations included the accurate presentation of news, and free expression of opinion in newspapers, as well as the need for a sufficient plurality of views in the newspaper market.
Lloyds executives have privately warned government officials that a PIIN at this late stage would be disruptive for the lender and its shareholders, a person familiar with discussions said. The bank has advocated that any PIIN should concentrate on the debt-for-equity swap and still allow debt repayment to take place. Lloyds is concerned that if the Barclay family’s bid is blocked, the bank stands to lose hundreds of millions of pounds owed to it: analysts do not expect the sale price of the newspaper group to exceed £600mn based on market comparisons.
A spokesperson for the bank declined to comment. Redbird IMI said it would make further representations to the government, “restating that if we gain ownership of the Telegraph and Spectator we will be fully committed to maintaining the existing editorial team . . . and believe that editorial independence for these titles is essential to protecting their reputation and credibility”.
Lloyds has paused an auction of the newspaper while it considers the debt repayment by the Barclay family, which it is obliged to accept if the proposal passes its anti-financial crime and money-laundering checks.
The decision to issue a PIIN could hold up any deal for months. If the deal with Redbird IMI becomes less likely, then Lloyds will liquidate the ultimate holding company of the newspaper group in two weeks and continue with the auction.
The newspaper published an editorial on Wednesday saying that “RedBird IMI needs to spell out how it will ensure that a cast-iron and binding commitment to the Telegraph’s continued independence can be guaranteed”.
It added: “The takeover of the Telegraph by a fund linked to a state not known for encouraging free expression is bound to concern readers.”
