Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The publisher of the Daily Mail, one of the UK’s best-selling tabloids, has lashed out at a law change designed to block the sale of rival Telegraph newspaper to an Abu Dhabi-backed investment group, as it pulled out of a new auction for the right-leaning broadsheet.
Daily Mail and General Trust blasted the law change as “overly restrictive” and said it would not bid again for the UK newspaper group, whose future ownership is uncertain for the second time in a year. DMGT did not sign the required non-disclosure agreement that would have allowed it to enter the new Telegraph auction process launched last month.
DMGT said it “believes the new statutory regime governing the ownership of UK newspapers is overly restrictive, and could curtail our ability to raise capital for our news publishing and other media businesses — both now and in the future”.
The former Conservative government this year ruled out any involvement of a foreign-state owner in a British newspaper, in a move designed to stop RedBird IMI’s takeover of the Telegraph.
The investment group, which draws about three-quarters of its funding from Abu Dhabi, has instead been forced to sell on its interest in the Telegraph and sister magazine, the Spectator.
However, the rule changes mean that other newspaper groups are also unable to raise funds from sovereign-backed investors. DMGT held talks last year about raising money from the region to back a potential bid for the Telegraph, with analysts saying the media group’s financial position would be too weak to mount a bid on its own for a newspaper valued as high as £600mn.
The Times first reported DMGT’s decision not to participate in the new auction.
The law change was widely supported by rival media outlets, including the Telegraph itself, and followed fears among MPs about interference or influence from foreign states that owned national newspapers.
The group’s decision not to participate in the new auction was not a surprise, according to people close to the process. They pointed to the array of regulatory hurdles regardless of the change of government, given DMGT’s range of UK national newspaper titles, including the Daily Mail and the Metro.
It said in a statement: “With a new government in place, we would face a heightened risk of a protracted regulatory process if we were to win the auction. This would cast further uncertainty over the Telegraph and could disrupt our plan to grow DMGT’s diverse stable of news titles.”
Whitehall officials are still expected to introduce a narrow and specific exemption for passive investments below a certain threshold, which is likely to be around 5 per cent.
The decision was pushed back until after the election. Such a low threshold would prohibit the sort of fundraising from the Middle East that is needed to back any major media deal.
First-round bids for the Telegraph and Spectator — which are likely to be sold separately — are expected at the end of next week. There are about 20 interested parties for the two titles in total, according to people close to the process. The sale is being run for RedBird IMI by Raine Group and Robey Warshaw.
Potential bidders include hedge fund boss Paul Marshall, who could bid for one or both of the titles, Belgium’s Mediahuis, UK-listed National World, and Rupert Murdoch’s News UK, which is only interested in the Spectator.
Other potential investment consortiums, including one led by advertising veteran Charles Saatchi, have also looked at potential bids newspaper, according to people close to the situation.
RedBird, a US investment group that has just backed the buyout of Paramount in the US, could also seek to raise money itself to buy out its Middle Eastern partner.
