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British government officials have sent letters to the Guardian Media Group and Tortoise Media requesting information about the proposed buyout of The Observer newspaper, to help judge whether the deal needs further scrutiny.
The letters mark the first time that officials have needed to request information about foreign state ownership of a newspaper since the law was changed last year to prevent the acquisition of The Telegraph newspaper by a US group backed by Abu Dhabi.
Tortoise, the UK digital start-up founded by former Times editor James Harding, last year agreed to acquire The Observer, prompting widespread staff unrest. Harding has promised to invest about £25mn in supporting the growth of the Sunday newspaper under Tortoise ownership over the next five years.
The deal is not expected to be in any danger of falling foul of the new rules given backing for the digital media group is from a mix of UK and foreign — but private, not state — investors including This Day, the charitable foundation founded by Labour donor and former Autoglass boss Gary Lubner, and Standard Investments, a US-based company. The Scott Trust — which owns The Guardian — will also take a minority stake in the new Tortoise/Observer group.
Two people with knowledge of the letters — which were sent by the Department for Digital, Culture, Media & Sport to the management of both groups — said that the questions concerned the structure of the deal and sources of funding.
One of the people added: “It is just to make sure that [the government] is happy with the details and there is no need to wade in under the wider Enterprise Act.”
The Enterprise Act regulates mergers and acquisitions of media businesses, including daily, local, and Sunday publications. The act gives the secretary of state the power to intervene in mergers if it is deemed to be in the public interest.
Those close to the deal described the letters as “procedural”, adding that there was no expectation that the government would have any grounds to object. The transaction is expected to be finalised this spring.
DCMS officials are preparing for a potentially busy few months for media deals in the UK. A deal to sell The Telegraph newspaper could be decided in coming weeks, according to people close to the situation.
Dovid Efune, the US-based owner of the New York Sun, is the frontrunner to buy the newspaper, although is still in talks with funding partners including Fortinbras, the investment firm founded by Leon Black’s son, to secure the cash for the deal.
Chelsea co-owner Todd Boehly has also held talks with Efune about backing his bid, or launching a rival offer for the newspaper.
Those close to the deal said that they had kept the government informed about the progress of the sale of the newspaper, which was “called in” by the previous culture secretary to stop the acquisition by RedBird IMI, the Abu Dhabi-backed investment group.
Representatives for Tortoise, the Guardian and DCMS declined to comment.
Culture secretary Lisa Nandy has consulted on whether to broaden the scope of the UK’s media mergers regime, including bringing news publications circulated on a weekly or monthly basis — such as The Economist or Prospect — into its scope.
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