How the Barclays lost The Telegraph

After news broke on Tuesday that the Barclay family’s titles might be seized by Lloyds Banking Group, there was a sense of shock for some in the Telegraph newsroom.

“I haven’t quite woken up to the fact that we no longer report to a Barclay for the first time in 20 years,” said one senior executive. 

But there was also a feeling of inevitability after years of talk of a potential sale by the family and long speculation over the huge debts that had been allowed to mount in holding companies of the Telegraph newspapers and The Spectator magazine.

The move by Lloyds to call in receivers and take control of the 168-year-old Telegraph marks the end of an era for a family whose fortunes, built up by Sir Frederick and the late Sir David Barclay in property, retail and logistics, have come under scrutiny in recent months following a succession of court cases that laid bare a bitter dispute within the family as well as growing financial pressures.

The twins’ 2004 acquisition of the newspaper from Conrad Black’s Hollinger after a bitter bidding war marked a crowning achievement for the Hammersmith-born entrepreneurs, giving them societal kudos and influence in the highest offices of the Conservative party, which was in government for much of their tenure. 

But the apparently sudden defenestration on Tuesday of Aidan and Howard Barclay, sons of the late Sir David, from the boards of the operating companies that control the Telegraph Media Group belies a long-running process by Lloyds to reclaim its debts.

The lender finally ran out of patience on loans, inherited through its acquisition of HBOS in 2008, that had been left to grow over the years as interest went unpaid. 

The debts, which approach £1bn according to those close to the process, have long been written down by Lloyds. “This has been in the making for many months,” said one person involved in the process. “The bank would not do anything suddenly.”

Bank insiders said the previous management of Lloyds was closer to the Barclay family, but the arrival of Charlie Nunn as the lender’s chief executive in 2021 also brought a fresh push to clear the decks of “legacy” bad debts.

Talks with the Barclay family over the past few years failed to lead to a resolution of the debts, according to banking insiders, leading Lloyds to call in receivers at AlixPartners this week to take charge of the Bermudian parent company of TMG as the first step to clawing back at least some of the money outstanding. 

The Barclays have not given up the fight to regain control of the newspaper, however. A person familiar with the family’s thinking said one option was to raise money from other investors, including from the Middle East, to help them buy it out of receivership. The family intends to make further offers, the person added, overseen by Aidan Barclay, who “still thinks he can get the show back on the road”.

The family said in a statement that it continued to talk to the bank. Bank of Scotland said on Wednesday that it was “willing to continue discussions to find a suitable solution”.

But for the Barclay family, according to another person with knowledge of its position, the bank has moved at a time of particular distraction, following a succession of court cases in the wake of Sir David’s death in 2021.

These court cases also give an insight into the complicated offshore structures created to hold the family’s businesses, as well as more recent pressures on the family’s finances.

The judge in an acrimonious £100mn legal spat between Frederick Barclay and his ex-wife summarised the family’s affairs last year: “In 2014, the two brothers set about dividing what they had so as to make provision for the next generation and with the intention of avoiding tax liabilities arising either in life or on death. This took the form of a web of highly complex overseas trust arrangements.”

The court heard that the brothers “shared an obsession with privacy but also with avoiding tax”.

The judge found that this had meant Sir Frederick’s share of the freehold of Brecqhou, a tiny Channel Island off the coast of Sark “where a huge mock castle was built by them at a cost variously put to the court at £80mn to £90mn and £120mn”, was now one of his main identifiable assets.

The family fortune built up by the twins had been divided equally between three of Sir David’s sons and Sir Frederick’s daughter Amanda after the 2014 restructuring. This rejigging of assets later caused a breakdown in relations between the brothers, the judge said.

The arrangements — often involving offshore companies based in Jersey or Bermuda whose beneficiaries include the younger generation — make it difficult to assess the family’s financial position. But the court case shows that the family’s business empire has come under pressure in recent years.

Aidan Barclay testified to the High Court in May as part of the divorce case that by August 2019, the conditions for family business — which include online retail group Very and logistics business Yodel — were “not easy”.

“We have had severe pressures in the business in the last couple of years,” he added.

The family has raised some cash in recent years, however, having sold the Ritz hotel in London in 2020.

The complex web of companies obscures the exact level of borrowing linked to TMG. People close to the process said it was difficult to see any sale reaching the value of the debt but that any money would be written back on to the British bank’s books. Analysts say the sale of the Telegraph and Spectator could fetch anywhere between £400mn and £700mn.

The sale of The Telegraph newspapers will now not be rushed, according to people involved in the process. Lazard is advising the bank on its options although other banks are expected to be appointed to help oversee the sale.

“This is not a distressed sale,” one added, pointing out that the bank was committed to finding the “right buyer” given the political impact and possibility that the competition authorities might take a dim view of any media consolidation. 

“The highest bidder may not be the best buyer,” he added. The sale is expected to attract deep-pocketed bidders that could be seen to be seeking a means of influencing UK politics, say analysts. One person involved in the process described the likelihood of a “trophy asset premium”. 

One potential UK-based bidder said Middle Eastern investors would be likely to face political and regulatory scrutiny, adding: “It’s a good franchise but it’s a single franchise facing ever more competition. The price tag being talked about of £600mn is delusional.”

Douglas McCabe, analyst at Enders, said newspaper stewardship “is not the same as widget factory management . . . For some proprietors, influence and relevance are important factors alongside commercial success.”

Another media executive monitoring the process with a view to making a bid said: “It’s rare for newspapers to be sold and normal financial metrics do not necessarily apply.”

The sale will still be helped by the fact that The Telegraph is a profitable business. In the year ending January 2, Telegraph Media Group reported sales of £245mn, up from £235.2mn the previous year, and a pre-tax profit of £29.6mn — up from £22.1mn.

McCabe added that since 2018 the newspaper had “expressed quality digital publishing nous, with lower story volumes but impressive impact. Its digital subscription model, and product development, have been well executed.”

Potential bidders fall broadly into two camps.

There are the industry buyers such as DMGT, the owner of The Mail, which could see the chance to bring together two right-leaning groups in a similar way to The Times and The Sun under Rupert Murdoch. Belgian group Mediahuis, which owns other right-leaning European newspapers, is another possible bidder. However, German media group Axel Springer is unlikely to bid at present, according to people familiar with its plans.

Analysts say Will Lewis, former Telegraph executive, is likely to try to pull together a group of investors for a bid, and expect former Mirror chief executive David Montgomery, who was beaten by the Barclays to the business in 2004, to take another look as the boss of rival media group National World.

Observers and media industry insiders say there is also likely to be interest from wealthy tycoons, from hedge fund boss Paul Marshall to Czech energy tycoon and budding media mogul Daniel Křetínský, and overseas sovereign wealth funds.

If allowed to be carried out separately, the sale of the Spectator magazine could be more straightforward: both cheaper and without the same competition hurdles. 

Murdoch could be interested in acquiring the magazine for both these reasons, according to analysts, but more importantly for the influence the title still holds among its dedicated rightwing audience. But he would face competition from other tycoons, according to a person close to the process who said: “The Spectator is every billionaire’s wet dream.”

Among Telegraph staff, and after several years of rumours that the media group was being put up for sale, the prospect of a new owner was greeted in phlegmatic style at least.

“As long as we don’t become a KGB agent’s ticket to the House of Lords, no one really minds who buys it,” said one Telegraph staffer. “It might even be a marginal improvement.”

Additional reporting by Jane Croft and Peter Foster