Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The £600mn takeover of the Telegraph Media Group by Abu Dhabi-backed RedBird IMI could face an in-depth regulatory review, giving the UK government more time to change the law to formally block the deal in the next few months.
Culture secretary Lucy Frazer on Tuesday said she was “minded to refer” the sale of the British news organisation to a phase 2 investigation by the Competition and Markets Authority, the antitrust watchdog.
There were grounds for further scrutiny of the £600mn takeover because of “the need for accurate presentation of news and free expression of newspapers”, Frazer said in a written statement to parliament.
Prime Minister Rishi Sunak’s government last week proposed changes to legislation going through parliament that would, in effect, prevent any foreign state from owning or having influence or control over a British newspaper.
Frazer said her decision to back an in-depth review reflected a report by media watchdog Ofcom, which found during an initial probe that the potential deal may be against public interest.
Ofcom considered that International Media Investments (IMI), a majority partner in the takeover vehicle’s owner, “may have the incentive to influence TMG in a way that could potentially act against the public interest in the UK”, she said. The other partner in the joint venture is US fund manager RedBird Capital.
IMI, which is controlled by Sheikh Mansour bin Zayed Al Nahyan, a vice-president of the United Arab Emirates and owner of Manchester City football club, provided about three-quarters of the funding to RedBird IMI.
RedBird IMI declined to comment.
Frazer’s decision was widely expected, especially after the plans outlined by the government last week following pressure from MPs and peers.
However, the move to a phase 2 probe will also give the government time to enact its pledge to kill the deal by keeping the investigation open, while Ofcom’s findings will give further justification for its decision.
RedBird IMI is drawing up plans to sell the newspaper group, which includes the Spectator magazine, although it will not make a final decision about its next steps until after the government publishes the full details of its changes to the law, according to people familiar with the situation.
UK ministers are working on a threshold for foreign state ownership to allow “passive” investment from sovereign wealth funds, which are among investors in listed UK media groups.
Any decision to sell would likely also need to involve the Barclay family, which remains the technical owner of the Telegraph Media Group.
The family lost control of the group after failing to repay bad debts of close to £1.2bn last year to Lloyds Banking Group. In the subsequent sale, RedBird IMI agreed to acquire it by buying this debt.
RedBird IMI now owns £600mn of debt behind the group, which carries an option to convert into equity ownership that RedBird IMI can no longer use.
Read the full article here