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Abu Dhabi-backed investment group RedBird IMI is preparing to formally withdraw its bid to take over the Telegraph as early as next week after months of talks with the British government, according to people close to the deal.
RedBird IMI’s takeover of the national newspaper – along with The Spectator magazine – was part of a deal designed to allow its previous owners, the Barclay family, to repay debts to Lloyds Banking Group. It was effectively blocked by the government earlier this year, although the takeover process has continued while RedBird IMI considers next steps.
RedBird IMI spent £600m buying media business debt secured by Lloyds, which came with the right to convert it into ownership.
The aim now is to finalize a structure with ministers this week that will allow the sale of The Telegraph and The Spectator, possibly in separate contracts. Officials are also trying to maintain some control over the newspaper while the investment group looks for an alternative buyer.
This could include expanding existing regulatory conditions, such as maintaining the company’s current structure and retaining independent directors, a person familiar with the situation said. An agreement that would lead to a formal withdrawal is expected next week, according to three people familiar with the situation.
Ministers want RedBird IMI to withdraw the offer before the competition watchdog launches a more detailed investigation. This would save the officials from having to publish all the investigation documents submitted so far.
An initial investigation into the deal by media regulator Ofcom concluded there would be significant concerns about including Abu Dhabi in the purchase of a national British newspaper, despite suggestions from RedBird IMI to protect the Telegraph’s independence.
The formal withdrawal of the bid will set in motion an auction process that is expected to attract bids from parties including hedge fund boss Paul Marshall, Rupert Murdoch’s News UK and the National World newspaper group.
However, RedBird is also willing to remain owner if bids are less than the £600m RedBird spent on IMI.
RedBird IMI has received several expressions of interest, according to people briefed on the details. Robey Warshaw’s advisors primarily deal with UK bidders, while Raine focuses more on international investors.
People close to the company said RedBird was also open to bringing in investors to replace all or part of the money provided by Abu Dhabi’s IMI. RedBird IMI receives about three-quarters of its funding from Abu Dhabi, although it insists it is operationally separate from its investors in the Middle East.
As part of this strategy, RedBird has held informal discussions with a number of potential partners about a joint venture, including Lord Rothermere’s DMGT, which owns the Daily Mail.
A joint venture could potentially address competition concerns raised by DMGT’s involvement. However, people close to the sale process said nothing had been agreed and bankers were still talking to a number of potential buyers and co-investors.
Analysts said DMGT would likely need additional funding for a standalone bid for the Telegraph. However, RedBird’s IMI offer has led to stricter rules for foreign government investment in media assets.
Officials are close to finalizing plans to limit the amount of stake a foreign state can own in a newspaper group to about 5 percent, according to people close to the negotiations.
RedBird IMI and DMGT declined to comment.