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The Telegraph newspaper and Spectator magazine are again up for sale after the Abu Dhabi-backed group that tried to secure ownership of the British titles admitted defeat.
The British government had blocked the sale to RedBird IMI, a US-managed fund that sources about three-quarters of its funding from Abu Dhabi, after promising to change the law to allow foreign states to take majority stakes in British media groups to disallow.
RedBird IMI confirmed on Tuesday that it would withdraw its offer and instead launch an auction for the newspaper and magazine to try to recoup its money. It had paid £600m to buy debt from Lloyds Banking Group, which could have been converted into equity stakes.
RedBird IMI said it intended to proceed with selling the option to buy the titles after weeks of negotiations with the government.
“Our ownership would have provided the strongest editorial protection ever proposed for a British newspaper, along with much-needed investment,” it said in a statement.
“We continue to believe that this approach would have benefited Telegraph and Spectator readers, their journalists and the wider UK media landscape. Regrettably, it is clear that this approach is no longer practical.”
Culture Secretary Lucy Frazer, who has been overseeing the government’s response, said: “Throughout this process I have raised concerns about the potential impact of this agreement on freedom of expression and accurate news reporting, and I have taken steps to ensure that “While media freedom is protected.” There has been an investigation into these concerns.”
RedBird IMI has appointed Robey Warshaw and Raine Group to oversee the auction. People familiar with the matter said there had already been expressions of interest around the world for both titles.
The Telegraph and Spectator could be sold together or separately depending on the offers received, they added. New financial results from the Telegraph are also expected soon.
RedBird IMI executives are interested in at least recouping the money already spent to buy the debt, the people said. According to a person close to the sale, the Telegraph is said to be worth at least £510 million, with the Spectator magazine making up the remainder.
If bids fall short of expectations, RedBird could also seek to remain as an investor without Abu Dhabi’s backing and instead seek funding from other US investors or work with a British media group such as Daily Mail owner DMGT.
The law passed by the British Parliament is expected to ban foreign states from owning more than 5 percent of British print media.
The Barclay family remains shareholders in the title but has no role in operations, having lost control to Lloyds last summer due to unpaid debts. Lloyds sold this debt to RedBird in the autumn, canceling an auction of the titles that was taking place at the time.
The latest auction will mean further months of uncertainty for the Telegraph, which will continue to be run by a group of independent directors until the process is completed.
Those interested in the Telegraph are expected to include hedge fund boss Paul Marshall, DMGT, Belgian publisher Mediahuis and regional newspaper group National World.
Most of these buyers would face scrutiny from media regulator Ofcom and the Competition and Markets Authority.
These groups could also bid for the Spectator, which has a larger list of potential buyers, including Rupert Murdoch’s News UK. Spectator editor Fraser Nelson said there had been 22 potential bidders in the previous auctions.
On Tuesday he said on The 22 potential bidders who were difficult to find last time can be brought together again in no time. There’s no reason to drag this out.”