Sunday, March 3, 2024

RedBird IMI proposes new structure to ease Telegraph ownership fears | Business News

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The Abu Dhabi-backed vehicle trying to buy The Daily Telegraph is proposing to amend its corporate structure in a bid to ease opponents’ concerns about media freedoms.

Sky News has learnt that RedBird IMI has told ministers that it will establish a new UK-based holding company for the Telegraph titles following weeks of complaints from parliamentarians and journalists about the £600m deal.

Whitehall sources said on Wednesday that Lucy Frazer, the culture secretary, was expected to update the House of Commons by saying that a fresh public interest probe would be required to scrutinise RedBird IMI’s acquisition of two of Britain’s most influential newspapers.

The new entity has the same ownership structure as the earlier vehicle, according to people close to the situation, being 75% owned by IMI in Abu Dhabi and 25%-owned by RedBird of the US.

A public interest intervention notice (PIIN) was issued by Ms Frazer late last year which subjected the prospective debt-for-equity swap handing RedBird IMI ownership of the titles to initial scrutiny by competition and media regulators.

Those investigations are due to conclude this week.

RedBird IMI declined to comment ahead of a Commons statement, while the Department for Culture, Media and Sport could not be reached.

Earlier on Wednesday, Sky News revealed that a Conservative MP is urging ministers to extend a probe into the Telegraph takeover, warning that the Abu Dhabi-backed vehicle which wants to acquire it may already be exerting “material influence” over the newspaper.

Neil O’Brien, a former health minister, wants the culture secretary to issue a separate public interest intervention notice (PIIN) which encompasses RedBird IMI’s repayment of a £1.2bn debt to Lloyds Banking Group on behalf of the Barclay family.

Many observers expect that the debt-for-equity swap will ultimately be referred by the CMA to a more in-depth Phase-II investigation that could leave the Telegraph’s future mired in uncertainty for months.

Sky News revealed recently that the Telegraph’s parent company’s independent directors had been notified by RedBird IMI that it intended to determine the titles’ future ownership even in the event that it is prevented from taking control of its shares.

The Gulf-based investor – a joint venture between RedBird of the US and Abu Dhabi-based IMI – had been keen to dispel the idea that either the independent directors or the Barclay family, the newspaper’s beneficial owners, would oversee any future auction.

Because RedBird IMI also owns a call option which can be exercised in exchange for ownership of the media assets, it believes it would be “in total control” of any process should the government block the acquisition, a source told Sky News earlier this month.

Scores of MPs and peers have lined up to oppose the takeover, arguing that the UAE has a poor record of upholding journalists’ ability to report impartially.

A string of prominent Telegraph writers, as well as the editor of The Spectator – which also forms part of the transaction but is not subject to the PIIN – have complained publicly about the prospect of the Abu Dhabi-backed vehicle gaining control of influential British media assets.

However, RedBird IMI – whose bid is spearheaded by Jeff Zucker, the former CNN president – remains confident that the editorial protections that it has submitted to Ofcom will address any concerns and pave the way for the deal to be approved.

Under the terms of the PIIN issued by Ms Frazer, RedBird IMI is prohibited from exerting any influence over the titles while investigations by the competition and media regulators are ongoing.

That includes the removal of key executives and editorial staff or any attempt to merge the Telegraph with other assets.

However, Cormac O’Shea, the Telegraph finance chief, has since stepped down, and there is mounting speculation that Nick Hugh, the newspapers’ chief executive, is about to follow suit.

The Telegraph’s holding company was forced into receivership by Lloyds Banking Group last year, following a long-running dispute over the repayment of a £1.16bn debt.

The loans and interest were repaid in December after the Barclay family structured a deal with RedBird IMI, which is majority-owned by Sheikh Mansour bin Zayed Al Nahyan, the ultimate owner of Manchester City Football Club.

The Times reported last month that TMG’s independent directors had alerted Whitehall to possible irregularities in the accounts of the family’s media assets, with the National Crime Agency reportedly informed.

RedBird IMI’s move to fund the loan redemption circumvented an auction of the Telegraph which drew interest from a range of bidders.

The hedge fund billionaire and GB News shareholder Sir Paul Marshall, Daily Mail proprietor Lord Rothermere and National World, a London-listed local newspaper publisher, had all hired advisers to assemble offers for the newspapers.

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