Rothermere’s DMGT secures funding for Telegraph takeover

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Lord Rothermere’s DMGT has locked down funding for its £500mn acquisition of rightwing newspaper Telegraph, crossing a significant hurdle to the transaction even as a US media tycoon gathers backing for an alternative bid should the deal fall over.

The funding package is expected to comprise equity provided by Daily Mail owner DMGT alongside an increase in the group’s debt with its long-standing lender NatWest, according to people familiar with the matter. 

Details of the financing structure will be handed to culture secretary Lisa Nandy next week as part of information that she will need before allowing the deal to proceed.

The move to secure funds comes as rivals have once again started to circle should DMGT’s takeover fail, either over funding or regulatory reasons.

Baltimore Sun owner and US broadcasting multimillionaire David Smith has now agreed to back Dovid Efune, the owner of the New York Sun, for a bid if Lord Rothermere fails to secure the deal, people familiar with the matter told the Financial Times.

Smith, executive chair of Sinclair Broadcast Group and owner of a number of regional US titles, is the latest to commit to Efune’s consortium, according to people with knowledge of the situation. 

As with Efune, DMGT is optimistic that it can grow the Telegraph in the US to expand its audience.

The sale of the Telegraph has dragged on for more than two years and has been punctuated by a number of aborted attempts by various investors to buy the UK newspaper. 

British-born Efune was in exclusive talks to acquire the newspaper last December, but negotiations faltered after he hit funding issues. Efune’s potential second bid has already secured about £100mn in investment backing from Brexit supporter Jeremy Hosking, a British investment executive.

Efune and Smith did not respond to requests for comment. DMGT declined to comment. NatWest said it does “not comment on rumour or speculation”.

For DMGT, securing funding is a boost after analysts had questioned whether the media group would be able to get financing to carry out the deal.

S&P warned last month that it may cut its ratings on the Daily Mail owner’s debt depending on the capital structure and financial profile of its acquisition of the Telegraph and whether this would “weaken our view of the group’s credit quality”. 

The talks to finance the debt in the deal with NatWest were first reported by Sky News.

DMGT has said there will be “no foreign state investment or capital” in the funding of its bid, a move designed to comply with a new law that limits ownership of UK national newspapers by foreign countries. The rules were introduced following backlash against a previous Telegraph bid backed by Abu Dhabi’s IMI.

DMGT was originally interested in acquiring the Telegraph alongside a Qatari investment group more than two years ago.

The latest DMGT offer will also face regulatory scrutiny from competition authorities in the UK given it would consolidate ownership of two of Britain’s largest national newspaper groups under a single proprietor.

Communications watchdog Ofcom will also need to vet the DMGT deal under rules around media plurality, which aim to ensure a wide range of news sources and opinions are available in the newspaper market.