As the dust settles on Labour’s landslide election win, the Conservative party is yet to decide when or how it will replace Rishi Sunak as leader. Meanwhile the newspaper regarded as the party’s house bible continues in its own kind of limbo.
More than a year after the Telegraph and its sister title, the Spectator, were seized by Lloyds Bank as down payments for debts run up by their proprietors, the Barclay family, the papers are still effectively ownerless with a second auction in under a year set to start in earnest on Friday next week.
What happens next is likely to set the tone for Britain’s right wing in both its politics and its media.
Many close to the paper nicknamed the Torygraph offer a shrug when asked what comes next in a saga that has lasted 13 months, involved the threat of criminal investigations and led to new takeover laws. Asked about the possibility of an unexpected new owner, one veteran dealmaker involved in the negotiations sighed: “Nothing would surprise me at this point.”
When the Barclays bought the titles in 2004, the auction involved clandestine deals, lawsuits and many bidders, all gazumped by the family’s £665m offer. The declining fortunes of newspapers ever since, hit by ageing readers and a digital revolution that decimated revenues, meant the Telegraph Media Group was valued in its immediate parent company at just £134m in the last year of full Barclay ownership, despite revenues of £254m. Nevertheless, the battle for TMG that began in June 2023 has, if anything, been wilder than before.
Just as the Lloyds auction was about to get under way in October, RedBird IMI, a relatively unknown US investment vehicle largely funded by Abu Dhabi, took control of TMG by paying off the Barclays’ outstanding £1.16bn debt in full. Half that sum covered Lloyds’ mooted £600m price tag for TMG, allowing RedBird to take control without a competitive auction.
As the complicated deal went off for regulatory review, the then culture secretary barred the Barclays from managing the titles they still owned on paper, with the independent directors appointed by Lloyds still managing the company. This has remained the case since, even as RedBird’s ambitions have been thwarted by increasing hostility to its deal, not least in the pages of the Telegraph, and a Conservative government that responded by rushing through laws against foreign state ownership of newspapers and magazines. At the end of April, RedBird IMI conceded defeat, its Arab-American takeover outflanked by parliament, and announced a new auction.
The new sale could be straightforward, but a combination of continuing questions over the former owners and political change makes it anything but.
The starting gun was finally fired on the auction process on 20 June, just after results for TMG in 2023 were finally released. These accounts, the first drawn up by a management team entirely independent of the Barclays for 20 years, revealed a £278m black hole due to a series of intercompany loans made from the group to other parts of the Barclay family empire that were considered unlikely to be repaid.
The publisher also warned of “potential irregularities” in the recording of historic transactions between group companies after a financial review of the past seven years could not trace the money. These discrepancies are understood to have prompted the series of suspicious activity reports sent to the National Crime Agency by several of the company’s regulated advisers, which emerged at the start of the year.
NCA investigations take a minimum of two years and, in the case of complex and potentially fraudulent financial crime, far longer. The latest TMG results warned of a “risk of future claims” in case the UK tax authority or any other agency took any future action against the titles.
The accounts were signed off by PwC, auditors for the Telegraph for many years under the Barclays. Earlier this year, Deloitte resigned as auditor of the last remaining large company owned by the family, Very Group, after 11 years.
The £278m provision pushed TMG to a record loss of £245m last year, despite a 5% rise in turnover to £268m. Although growth in digital subscribers helped drive operating profits up 35% to £53m, the risks could deter potential bidders.
To avoid this, a process designed to create a new company without the liabilities and baggage of its predecessor, a so-called hive down, was used. “Any monkey business is kept separate and is not consequently in the sale,” said someone involved.
The plan seems to have worked, with keen interest in titles rarely on the market, including from some of 2004’s disappointed suitors such as Times owner Rupert Murdoch, and former media executive turned local news consolidator David Montgomery. However, the Times reported on Wednesday that Lord Rothermere, the owner of Daily Mail, had pulled out of the auction over fears the newspaper group would be drawn into a long and complex competition inquiry.
Others entering the race include Sir Paul Marshall, libertarian backer of GB News and the UnHerd website, and Lord Saatchi, a former Tory co-chair responsible for the party’s best known advertising campaigns. Even Conrad Black, the man who sold to the Barclays before going on his own tumultous journey, is said to have been approached about a potential bid.
after newsletter promotion
Despite such complications, there are still expected to be several first-round bids on 19 July for the Telegraph, given it could confer the winner the power to become kingmaker for the next leader of an albeit much-diminished Conservative party. With its previous owners the Barclays both keen on Brexit and friends of Nigel Farage, it will be interesting to see what the new owner makes of those links with the Reform party, which won its first five elected MPs this month. A potential auction winner is not expected to be announced until the end of the summer at the earliest, just as the Conservative party leadership battle goes into full swing.
Jeff Zucker, the former CNN executive spearheading the RedBird IMI deal, has appeared on public platforms arguing that interest has come from “around the globe”. The group has appointed the Raine Group, a US boutique bank best known in Britain for its roles in advising on Premier League football deals, as well as the former chancellor George Osborne of City advisory firm Robey Warshaw.
RedBird’s main aim is to make a return on the £600m used to pay off part of the Barclays debt. Those close to Zucker suggest he would rather open a new fund in the US, to replace the 75% backing from the UAE, than sell at a loss.
One further wrinkle faced by potential buyers is over the unfinished business left by the outgoing government. Sunak’s snap election call did not leave enough time to finesse the foreign ownership ban. As the legislation stands, the Norwegian sovereign wealth fund – the world’s largest, holding 1.5% of all listed companies – would have to sell any stake in UK newspapers. It could also make it difficult for multimedia owners such as Murdoch and Rothermere to accept investment from such funds for non-UK assets while owning their British newspapers.
The situation is complicated. Tina Stowell, the Tory chair of the Lords communications select committee, whose amendment brought in the foreign state ownership veto, told the Guardian there were two important principles at stake, only one of which had been dealt with. “Firstly, we needed to make sure that no foreign government had control over our newspapers. Secondly, we need to make sure our news industry is financially sustainable and has a future.”
With the Conservatives having run out of time to pass the bill’s secondary legislation into law, the issue is likely to sit high in the in-tray of the new culture secretary, Lisa Nandy. The laws are said to be ready to go and could be put before the house before recess. However, Nandy is said to have other priorities, such as moves to introduce a football regulator, arguably a far more important issue to Labour voters than the fate of a newspaper that backs its rival.