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RedBird IMI is leaning towards a full sale of the Telegraph Media Group following the UK government’s decision to block its Abu Dhabi-backed takeover of the rightwing newspaper, according to two people with knowledge of the plans.
Options also include bringing in its own US investors in a new entity to replace Abu Dhabi’s cash, they said, cautioning that a formal decision has yet to be made. RedBird IMI is a joint venture between US fund manager RedBird, run by former CNN boss Jeffrey Zucker, and IMI, an Abu Dhabi investment vehicle.
Conservative Prime Minister Rishi Sunak, who is lagging in polls ahead of general elections expected this year, effectively blocked the deal by pledging to change the law so that sovereign wealth money could not be used to acquire British news media businesses. RedBird IMI is about three-quarters funded by Abu Dhabi money.
RedBird IMI would prefer to sell the newspaper, along with the Spectator magazine, the people said. However, if offers do not reach the valuation being sought by RedBird IMI, which wants to recoup its £600mn investment, it 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 legislative details are published 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, people said. This is a reflection of the fierce opposition among British politicians about Abu Dhabi owning even part of the Telegraph.
Previous bidders, including the consortium led by hedge fund manager Paul Marshall, which includes US billionaire Ken Griffin, and Daily Mail-owner DMGT have already indicated their interest, according to another 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 the £600mn of convertible debt in the Telegraph group — whose conversion would lead to full equity ownership. Until then, the Barclay family, whose stake was seized by Lloyds Banking Group, will 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’s amendment 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 ten per cent, though they noted live discussions were ongoing.
The proposed legislative change on foreign state ownership 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.