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RedBird IMI is leaning towards a full sale of Telegraph Media Group following the UK government’s decision to block its Abu Dhabi-backed takeover of the rightwing newspaper, according to people with knowledge of the plans.
Options also include bringing in US investors to a new entity to replace Abu Dhabi’s cash, the people said, cautioning that a formal decision has yet to be made. RedBird IMI is a joint venture between US fund manager RedBird Capital and Abu Dhabi investment vehicle IMI.
Conservative Prime Minister Rishi Sunak, who is lagging behind Labour in polls ahead of a general election expected this year, effectively blocked Redbird IMI’s £600mn takeover of Telegraph Media Group by pledging to change the law so that sovereign wealth money could not be used to acquire British news media businesses. The joint venture is about three-quarters funded by Abu Dhabi money.
Redbird IMI, run by former CNN boss Jeffrey Zucker, would prefer to sell the Telegraph, along with the Spectator magazine that is also part of the group, the people briefed on the plans said.
However, if offers do not reach the valuation being sought by RedBird IMI, which wants to recoup its £600mn investment, RedBird Capital could turn to existing US backers of its funds to create a vehicle that would own the newspaper, they added.
RedBird IMI is expected to wait until the government publishes its planned change to the law before making a decision. UK ministers are working on a threshold for foreign state ownership to allow “passive” investment from sovereign wealth funds run by countries such as Norway and Singapore. Norway’s fund, for example, is an investor in listed UK media groups.
RedBird IMI, which has been advised by investment bank Robey Warshaw, could hire another bank for the sale.
IMI, which is controlled by Sheikh Mansour bin Zayed Al Nahyan, a vice-president of the United Arab Emirates, is unlikely to be involved in any future deal, the people with knowledge of the matter said. This is a reflection of the fierce opposition among British politicians about Abu Dhabi owning even part of the Telegraph.
Previous bidders. including a consortium led by hedge fund manager Paul Marshall, and Daily Mail-owner DMGT, have already indicated their interest in the Telegraph, according to one person close to the situation.
Rupert Murdoch’s News UK wants to acquire the Spectator, while UK-listed regional media group National World is also expected to renew its interest in the Telegraph.
Executives and bankers involved in the process said various parties could be open to joint ventures or consortiums, notably to address probable antitrust concerns over bidders such as DMGT.
One executive involved in the discussions said: “Everybody is talking to everyone to look at all possibilities. People will talk to each other as this needs to be resolved quickly.”
Redbird IMI would sell £600mn of convertible debt it used to effect its takeover of Telegraph Media Group, and whose conversion would lead to full equity ownership.
Until then, the Barclay family, whose stake in the group was seized by Lloyds Banking Group, retain technical ownership of the newspaper, but with no operational control.
Meanwhile, the Telegraph’s independent directors are finalising a restructuring of the company’s assets and their transfer into a new entity.
The UK government will change the law to prevent a foreign state from owning or having influence or control over a British newspaper through an amendment to its digital markets bill, and this is set to be presented to parliament by Thursday next week.
Government officials suggested they will look to reduce the threshold for material influence over an entity to below 10 per cent, although they highlighted that live discussions were ongoing.
The proposed change in the law on foreign state ownership of UK media does not override a separate regulatory process to approve the RedBird IMI bid, government officials said. Culture secretary Lucy Frazer is expected to refer the takeover to a “phase 2” investigation.
RedBird IMI declined to comment.
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