Britain’s Telegraph Media Group (TMG) is the focus of intense political activity as a result of a provisional agreement to sell the 168-year-old Daily Telegraph to Abu Dhabi-backed RedBird IMI fund, in the United Arab Emirates. The planned sale had come as a result of TMG’s seizure by lenders to its 19-year owner, the heavily-indebted Barclay family.
TMG had been acquired by the Barclays for a toppy £665mn in 2004.
Lloyd’s Bank took control of the £254mn-revenue company and its associated Spectator magazine earlier this year and Goldman Sachs last month launched a sale process. Prospective bidders included: Daily Mail & General Trust, £80mn-revenue regional publisher National World, and hedge fund owner and GB TV News backer Paul Marshall.
Other interested parties have included Axel Springer, News Corp, Czech-based investor Daniel Kretinsky, and former Dow Jones and TMG executive Will Lewis (before he was appointed recently as CEO the Washington Post). Before this latest twist, it had even been rumoured that WaPo owner Jeff Bezos would be mounting a bid for the Telegraph with his new CEO.
But that was all changed by an agreement for the UAE fund to repay the £1.15bn ($1.4bn) Barclay borrowings, partly in exchange for an option to convert some of the new debt into equity (and, therefore, ownership) of TMG. RedBird IMI has said it would take control of TMG at the earliest opportunity.
In an era when news brands (and especially those built on newspapers) are not supposed to matter much, the prospects of a Middle East takeover has ignited a political storm. The unlikely coalition of opponents to the proposed deal variously includes:
- Opponents of media ownership by “non-democratic” states
- Members of the ruling Conservative government, supported by the Telegraph
- “Free press” campaigners
- Would-be bidders for the Telegraph
- Opponents of some (or all) foreign investment.
The whole controversy is complicated by the simple fact that the UAE is a major investor in UK companies, infrastructure and sports clubs. So Government ministers and others have been treading carefully. The appointment of Jeff Zucker, the former CEO of CNN and NBCUniversal, as chair of RedBird IMI has added to the drama. It is assumed that a key part of his strategy for the Telegraph is its expansion in the US (beyond the tentative steps hitherto) on the way to challenging the New York Times and The Guardian in the emerging competition for English-speaking digital audiences around the world.
But – the day after Lloyd’s Bank had formally notified the Department of Culture, Media & Sport that it proposed to complete the sale by an agreed deadline today (Dec. 1) – the government yesterday (Thursday 30 Nov) triggered an enquiry by the Competition and Markets Authority which will examine “the jurisdictional and competition matters” while the Ofcom media regulator will review public interest issues including “the need for accurate presentation of news and free expression of opinion in newspapers”.
Both enquiries are due to report by 26 January.
While the delay could derail the UAE plans, the would-be owners may find a way either to proceed with the purchase as planned (and take their chances on the outcome of the enquiry) or to agree a completion delay with Lloyd’s Bank. In the event, few insiders are predicting that the acquisition will be actually be blocked by the government, beyond an insistence on some kind of independent oversight of Telegraph journalism.
That – and more detail of Zucker’s plans would be likely to calm the fears both of staff and also of the ruling Conservative Party. It is believed that some members of the Telegraph leadership team support the RedBird plans. Zucker was in London this week in his campaign to shift the narrative and explain his ambitious plans for a company which has been starved of investment for some years.
Some Telegraph journalists have privately warmed to Zucker as the man whose CNN went to war against Trump, while others were agitated to realise it. But he might have been starting to win the propaganda war, helped by the disclosure that well publicised research – apparently showing Telegraph readers would quit if it was owned by an Abu Dhabi company – had been carried out by a lobbying company representing one of the rival bidders.
The possible sale of TMG to RedBird had been able to pre-empt the planned auction because the publishing and other assets seized by Lloyd’s Bank were known have a value in excess of the £1.15bn of debt secured on them. The agreed UAE price for the trophy media assets is said to be £600m – a seemingly “reasonable” price of 12x EBITDA. The other 50% of the debt (covering non-media assets which are also said to be worth much more than the debt attached to them) would apparently be paid by Sheikh Mansour, a member of the UAE Royal family. His international media investment company owns 75% of RedBird IMI – and also the English premier league champions Manchester City and other soccer-football clubs in the US, Australia and India. Its media investments include CNN Business Arabic, Sky News Arabia and Euronews.
Many believe that, in an auction, the Telegraph and The Spectator would together attract bids of some £700mn, with the prestigious political weekly accounting for as much as £100mn of that. On that basis, the UAE fund would be buying the media assets at a discount price. That’s why it has been able to do the deal directly with the Barclay family. It may want to flip the magazine to, say, News Corp (said to be keen to acquire). If they did that, RedBird would have secured ownership of the Telegraph itself for “only” £500mn. But it might actually want to retain The Spectator which – although it has revenue of only £20mn and 13% EBITDA margins – has a print and digital circulation of 130k and more than 3mn global monthly uniques. Everybody is talking up the global prospects both of the Telegraph and Spectator.
But, for now, the story is all about the UK.
The alleged risk to press freedom has been providing the most noise and some have drawn attention to what they see as the constrained coverage of the UAE’s own 15-year-old broadsheet news brand The National. The Financial Times said: “While the newspaper has established its reputation as one of the most professionally produced publications in the Middle East — a go-to news source for diplomats and executives — it is seen as a mouthpiece for Abu Dhabi’s worldview.”
It is anyway obvious that Lloyd’s Bank have always preferred (and anyway may have beeen legally obligated to accept) the UAE cash – in preference to UK media-owner bids that would almost certainly involve lengthy review on competition grounds. But those rival bidders are now waiting to see whether RedBird IMI does complete its deal.
Most insiders have understood clearly TMG’s attraction to Lord Rothermere’s now-private DMGT whose Daily Mail and the Telegraph would create a stronger right-of-centre stable against News Corp’s The Times and The Sun. Rothermere has long coveted the Telegraph but may now be even keener to use its subscriptions marketing expertise (it now claims 1mn digital subs) to diversify the Mail’s revenues. It could be a brilliant combination.
The two news brands would together be an attractive package both for readers and advertisers, in print and digital, in the UK and internationally (where Mail Online is already a substantial and highly-profitable ads-funded digital brand). It would be a great fit. But the need for heavy external funding might pose a challenge to DMGT’s hard-won independence: it delisted after 100 years on the London Stock Exchange.
Is there still a way for the Daily Mail and Daily Telegraph – the UK’s two most profitable daily news brands – to be brought together?
Although DMGT wants to own TMG outright (of course), the consolation prize might be a complex joint venture in which Rothermere’s company assumes responsibility for the commercial operations including print, marketing, as well as advertising sales (which it already handles for the Telegraph) and back-office functions. Such a non-content JV need not involve actual ownership or a dominant shareholding and might, therefore, not require a formal review on competition grounds.
A straightforward sale to RedBird might still be simpler for Telegraph creditors and even for the UK government. But there may yet be encouragement from Conservative politicians for discussions to bring together – in some way – their two favourite newspapers. Phew.