The Abu Dhabi-backed outlet that was about to buy The Daily Telegraph is in detailed talks with Whitehall officials over the structure of a subsequent sale of the newspaper.
Sky News has learned that RedBird IMI is in talks with the Department for Culture, Media and Sport (DCMS) about whether it can convert a purchase option that constitutes the ownership right of the Telegraph and Spectator in shares of the assets prior to their purchase by a new owner.
City sources said the discussions were key to the value RedBird IMI could generate from the sale of some of Britain’s most prominent media assets, because the outcome would determine whether newspaper and magazine titles could be sold separately.
RedBird IMI is said to have argued that it should be allowed to convert the option into shares as part of a “back-to-back” transaction with buyers of the Telegraph and Spectator.
It is understood that The Spectator could be worth £100 million or more as a “trophy asset”, but that this valuation would be undermined if the magazine were sold in the same transaction as the newspapers.
A public interest intervention notice (PIIN) which prevents RedBird IMI from exercising control over Telegraph Media Group (TMG) could also be extended depending on the identity of a potential new owner, according to insiders.
Negotiations on the conversion of the purchase option are among the topics under negotiation between RedBird IMI and DCMS.
A new auction of the newspapers and the Spectator is expected to begin in the coming weeks, once the structural issues are resolved.
Earlier this month, Sky News revealed that the Raine Group, best known in Britain for its role in recent deals involving football clubs Manchester United and Chelsea, and Robey Warshaw are being lined up to advise on the next phase of the property. from the Telegraph.
RedBird IMI, which is partially owned by US-based RedBird and majority owned by Abu Dhabiof IMI – which is supported by the Deputy Prime Minister of the UAE and ultimate owner of City of Manchester Football Club, Sheikh Mansour bin Zayed al Nahyan – has held a call option for several months aimed at converting £600m debt into equity ownership of the media assets.
This agreement became impossiblehowever, by the government’s adoption of legislative changes to prevent any ownership of British national newspapers by investors linked to foreign states.
Lucy Frazer, the culture secretary, also said she intends to refer RedBird IMI’s acquisition of the Telegraph titles for an in-depth investigation by the Competition and Markets Authority.
The complexity of the ongoing sale process could act as a deterrent to potential bidders, as restrictions placed on RedBird IMI and the Barclay family, the beneficial owners of the newspapers, could hamper the buyers’ ability to carry out due diligence.
The fate of the Telegraph, historically a staunch supporter of the Conservative Party, has been up in the air for almost a year after Lloyds Banking Group took control of its parent companies after Barclays fell behind on debt payments.
Since then, a number of bidders, including Lord Rothermere, owner of the Daily Mail, and Sir Paul Marshall, shareholder of GB News, have expressed an interest in buying the bonds.
Sky News revealed this week that Sir Paul is preparing to step down from the board of the parent company of GB News, the television news channel he helped fund, as he prepares a new bid for the Telegraph.
The £600m acquisition of RedBird IMI was vehemently opposed by Telegraph journalists and Conservative politicians in both houses of parliament.
It sought to calm the controversy over the deal by offering legally binding guarantees on editorial freedom and, in January, restructured its proposal to incorporate a new UK holding company that would own the Telegraph titles and Spectator magazine.
A trio of independent directors from the Telegraph holding company were parachuted in by Lloyds Banking Group last year after the lender took control of the newspapers from their long-time owners, the Barclay family.
However, the sale process was brought forward by RedBird IMI’s repayment of £1.16 billion of loans owed by Barclays for Lloydswith £600 million used to buy the call option and the remainder as a loan secured by the family’s other assets, including online retailer Very Group.
Earlier this year, the independent administrators appointed to oversee the sale of The Daily Telegraph were warned by Frazer that the removal of the newspaper’s two most senior executives was in breach of a government order – and that any subsequent transgression could result in a multi-million pound fine.
RedBird IMI and DCMS declined to comment.
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