RedBird IMI takeover of Telegraph faces fresh scrutiny over proposed structure

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Abu Dhabi-backed RedBird IMI faces further regulatory scrutiny of its £600mn planned takeover of the Telegraph Media Group following UK government concerns about a proposal to overhaul its corporate structure for the business. 

RedBird IMI wants to create a holding company via a new English limited partnership to acquire the newspaper group, as part of a package of proposals designed to guarantee the independence of the editorial team of the right-leaning broadsheet. 

Lucy Frazer, culture secretary, on Thursday asked Ofcom and the Competition and Markets Authority to consider whether the new holding company in effect represented a materially different deal, and so needed a new probe from both regulators.

RedBird IMI’s bid was already being scrutinised by Ofcom, which was due to present its recommendations to Frazer this week. She had asked the regulator to report on whether the deal could raise public interest concerns in relation to the need for accurate presentation of news and the need for free expression of opinion, given the risk of influence by Abu Dhabi over the newspaper.

On Wednesday morning, Ofcom chief executive Melanie Dawes said that it would report “imminently”. The new government intervention could extend the process by a further few weeks.

The proposal for the new UK company was not intended to change the identity, nature or economic interests of the ultimate shareholders at RedBird IMI, the government said, citing the investment vehicle. International Media Investments, an Abu Dhabi vehicle controlled by the Manchester City owner Sheikh Mansour bin Zayed bin Sultan al-Nahyan, owns about three-quarters of RedBird IMI.

A spokesperson for RedBird IMI said: “This change was made in order to clarify the point that IMI is a passive investor in the company that will own the Telegraph and as such will have no management or editorial involvement whatsoever in the title.”

In a written statement, Frazer said that given the “very late stage in the process at which information about this new corporate structure has been shared and implemented . . . I do not consider this is conducive to the full and proper functioning of the process”.

RedBird IMI managed to short-circuit an auction process of the newspaper group last year by agreeing to repay the debts of the original owners, the Barclay family, which had prompted the Lloyds Banking Group to seize control of the assets.

The deal has sparked considerable opposition from Conservative MPs — with the Telegraph traditionally seen as closest to the policies of the party — as well as from rival newspaper groups that have previously signalled their interest in buying the title.

Members of the editorial team at both the Telegraph and the group’s Spectator magazine have also flagged concerns over the record of press freedom in Abu Dhabi, and worries over editorial independence from part-ownership of a foreign government. 

RedBird IMI, which is run by former CNN boss Jeff Zucker, has promised to create an editorial charter overseen by independent media executives in a legally binding governance structure. Other legal undertakings to the government have promised to guarantee IMI’s status as a passive investor, with no role in operational or editorial matters.

In a separate letter to RedBird IMI, the government said it remained “concerned about the potential influence of International Media Investments over TMG which could affect the free expression of opinion and accurate presentation of news in the newspapers”. 

The letter continued that there were “certain reserved matters where IMI consent will still be required under the partnership agreement”.

Analysts predict that Frazer will probably refer the deal to the CMA for a more in-depth probe, owing to concerns over press freedom from the takeover of a national newspaper by an investment group backed by Abu Dhabi.

The move would be a politically safe option, according to people close to the transaction, given it would delay a concrete decision for some months and provide extra evidence for a move either to rubber-stamp the deal or block it on public interest grounds.