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The UK government has ruled out any direct foreign state ownership of a British newspaper in a strongly worded amendment to a law that would in effect block Abu Dhabi-backed RedBird IMI’s takeover of Telegraph Media Group.
Direct investment in UK newspapers of any size by a foreign state will be banned under the new regime being drawn up by Whitehall officials, according to a legislative amendment published by the government on Thursday.
Ministers are also pushing for a more strongly worded definition of foreign state, and the extent to which it could be seen to have control or influence, than the national security act when applying to a newspaper or a news magazine.
RedBird IMI is already considering a potential sale of the Telegraph following the government’s move last week to prevent any foreign state from owning or having influence or control over a British newspaper.
Possible bidders are being sounded out should it come back for auction, and the joint venture between US fund manager RedBird Capital and Abu Dhabi investment vehicle International Media Investments could alternatively bring in other investors to replace Abu Dhabi funds, according to people familiar with the matter.
Under the proposed amendment, the definition of foreign power will refer to the head of a foreign state, a foreign government or part of a foreign government, an agency of a foreign government, authorities responsible for administering the affairs of an area within a foreign country, governing political parties, and officers of governing political parties.
The restriction will also apply to ownership, control or influence of newspapers and news magazines by associated individuals other than the sovereign or head of state and ministers investing their private wealth, in order to capture all possible ways in which a foreign state could seek to secure control or influence over a UK newspaper or news magazine.
If passed, the changes to legislation going through parliament would in effect prevent the £600mn takeover of the Telegraph by RedBird IMI.
The government will, however, be introducing a narrow and specific exemption for passive investments below a certain threshold, via secondary legislation.
This will allow the so-called passive stakes held by sovereign wealth funds owned by countries such as Norway in listed British media groups, for example.
IMI, which is controlled by Sheikh Mansour bin Zayed Al Nahyan, a vice-president of the United Arab Emirates and owner of Manchester City football club, provided about three-quarters of the funding to RedBird IMI. RedBird IMI declined to comment.
The amendment presented by the government on Thursday follows the publication of a letter to the bidding vehicle for RedBird IMI detailing the reasons why culture secretary Lucy Frazer is expected to refer the sale of the Telegraph to a phase 2 investigation by the Competition and Markets Authority, the antitrust watchdog.
The in-depth regulatory review will give the UK government more time to change the law to formally block the deal, which includes the Spectator magazine and was opposed by a number of MPs and peers.
The letter refers to a report by Ofcom, the media watchdog, citing concerns over public interest issues around the deal. Ofcom said there was “evidence of the UAE government’s approach to freedom of expression which, given its close ties with IMI, may indicate IMI’s propensity to exercise influence to curtail freedom of expression in the Telegraph titles”.
It added that “IMI has clear political and broader commercial incentives to influence the editorial line of the Telegraph titles, particularly in matters relating to the UAE and its broader political and commercial interests . . . in a way which could negatively affect the accurate presentation of news and free expression of opinion”.
Earlier on Thursday, National World, the regional media group, said it was interested in any future sale of the Telegraph, describing itself as the “best qualified among the various candidates” to own the rival company.
Source: Economy - ft.com
