Rishi Sunak tried to stop the takeover by Abu Dhabi’s RedBird IMI of the Telegraph, by changing the laws to prevent a foreign country buying a British media organisation.
The UK Prime Minister has proposed changes in legislation that is currently going through the parliament. This will, in effect prevent any foreign state owning, having influence, or controlling a British paper.
Lord Stephen Parkinson, the culture minister, presented his plans in the House of Lords on Wednesday.
Parkinson stated that the proposals “would amend the media merger regime to explicitly rule out newspaper or periodical news magazine merges involving ownership influence control by foreign state”, Parkinson.
The Competition and Markets Authority would vet any deal that involved a foreign state, and block or unwind it if they found the country had influence or control over an media British group.
He said that the “broad” definition of state influence includes officers of foreign governments who act in private capacities and invest their own wealth.
According to sources close to the transaction, the legislative proposal would likely block RedBird IMI from acquiring the Telegraph Media Group for £600mn. Abu Dhabi contributed about three quarters of RedBird IMI’s cash.
IMI is the Abu Dhabi vehicle that controls RedBird’s joint venture. Sheikh Mansour bin Zayed Al Nahyan is a vice president of the UAE and the owner of Manchester City Football Club.
Downing Street was under pressure from Conservative Members of Parliament to block the deal that includes the Spectator Magazine.
The government stated that it had listened to the arguments of parliamentarians over the past few weeks. It added that an amendment to the digital markets bill will provide “additional safeguards for a freedom of press, which is a cornerstone of our democracy, and a government priority”.
RedBird IMI’s spokesperson said the company was “extremely dismayed” by the move of the government and will evaluate “next actions”.
RedBird IMI has “made it clear that The Telegraph and The Spectator was a commercial undertaking”, a spokesperson said.
The joint venture must decide whether it will bring in additional money to dilute the Abu Dhabi share or sell the Telegraph and Spectator.
RedBird IMI struck a deal with Lloyds last year to purchase the media group for approximately PS600mn. The bank had taken control of the Barclays’ dues. The deal’s completion was delayed by a regulatory investigation.
RedBird IMI has received investment offers from previous bidders on the Telegraph.
Before RedBird IMI’s deal, several media groups and investors expressed interest in The Telegraph.
The Daily Mail is owned by DMGT. Sir Paul Marshall, a hedge fund millionaire, was also interested in buying the Spectator. News Corp, Rupert Murdoch’s News Corp, is also interested.
At the next legislative reading, the government’s amendments to the Digital Markets Bill are due to be voted upon by the parliament. This could mean that it is approved in a matter of weeks.
According to a person who was briefed about the issue, a low threshold for foreign state ownership is expected, which will allow only small passive shares, like those held by the Norwegian sovereign fund.
The proposed changes to law replaced an amendment to digital markets bill made by Conservative peer Baroness Tina Stowell who wanted parliament to be able to veto foreign states buying British news organisations.
Stowell retracted her amendment on Wednesday, which received widespread support across the party spectrum.
Sunak intervened after two regulators who were investigating RedBird IMI’s takeover Telegraph Media Group presented their initial findings on Monday to Culture Secretary Lucy Frazer.
The recommendations from media watchdog Ofcom, and the CMA remain confidential until Frazer decides whether or not to approve the deal.
This would likely delay the final decision until Sunak’s amended becomes law.