Jeff Zucker's raid on The Telegraph could be considered the greatest act of media recklessness if it were so
< Instead, none other than industry commentator Donald Trump took the opportunity to heal the wounds of the man who made him an NBC TV star on The Apprentice and then became its main antagonist. as head of CNN.
“Jeff Zucker was always a loser, people just didn’t know it,” Trump quipped in his own Truth Social Twitter spoof after the bid failed last month.
p>Yet Zucker, frontman of UAE-backed fund RedBird IMI, could still emerge victorious if he and his bruised colleagues can engineer further sales and quick profits.
The grievance behind Trump's accompanying attack on The Telegraph itself was less obvious. “It was a terrible investment – it should have gone bust years ago!” — the former president wrote. At Truth Social, everyone seems to be a critic.
Jeff Zucker faces a battle to recoup his investment. Photo: Clara Malden
For Zucker and The Telegraph, criticizing Trump will mean nothing. However, the former president unwittingly faced two problems that are now at the center of the ownership crisis, which is approaching its first anniversary.
First, for complex reasons independent of the strength of the underlying business, Zucker and RedBird IMI will discover that the line between a terrible investment and a winning one can actually be a good one.
Second, there are unintended consequences under the law: after the fight against public ownership, the danger to The Telegraph remains serious.
A costly gamble
Tomorrow Zucker would have left behind his doomed relationship with The Telegraph and The Spectator magazine if could. But RedBird IMI must overcome a tangle of challenges in the coming weeks if it is to sell on the £600 million loan to the Barkley family it had hoped to turn into freehold titles.
This is a gamble that British politicians are taking. and regulators allowing a foreign power to finance a takeover of The Telegraph appears to have been very bad advice.
Having finally lost patience with the Barclay family over £1.2 billion of loans that had been in default for years, Lloyds Banking Group seized control of The Telegraph and The Spectator on June 7 last year, sending recipients. Goldman Sachs has received the gavel for the auction, which is scheduled to begin in late October. Potential bidders were warmed up and nominated by their own bankers.
With Goldman awaiting the first round of trading and a key court hearing in the British Virgin Islands approaching, the Barclays offered to pay the £1.2 billion in full in early December. . The money was half borrowed from RedBird IMI and half directly from its main sponsor, UAE Vice President Sheikh Mansour bin Zayed Al Nahyan.
Lloyds was forced to accept this offer, and The Telegraph and The Spectator were effectively mortgaged RedBird IMI, which immediately began down the path that ultimately led to last month's defeat in the House of Lords.
UK Government Ownership Newspapers — with the exception of, for example, sovereign wealth funds' passive stakes in tracking stock markets, which have less than a 5% stake — are set to be banned when the Digital Markets Bill receives Royal Assent around the end of this month.
About three-quarters of RedBird IMI's money comes straight from the Persian Gulf, leaving its hopes of controlling The Telegraph buried in the desert.
Throughout the battle, Zucker complained that attacks on the bid were being orchestrated by rival bidders who were blindsided by RedBird IMI and the UAE's attempt to disrupt the auction. “We were a little smarter than some of our competitors,” he said in an interview.
But now Zucker and his colleagues must rely on these rivals to help them get out of the corner. Having lost face, they cannot lose money.
Under pressure
RedBird IMI desperately needs to find a buyer willing to pay more than what it paid. He extended a £600 million loan to the Barclay family without carrying out any formal due diligence, valuing The Telegraph at £510 million and The Spectator at £90 million.
The support of UAE Vice President Sheikh Mansour bin Zayed Al Nahyan led to a crisis in the sale of The Telegraph. Photo: UAE PRESIDENTIAL COURT/REUTERS
This means that if he had agreed to accept less than £600 million (plus the millions he has spent on consultants over the past few months), he could have suffered significant reputational damage. Although the Sheikh provided the vast majority of the capital for Redbird IMI Telegraph's misadventure, around £150 million came from RedBird Capital's own funds.
RedBird Capital's investors include family offices and pension funds, which may not take kindly to a loss on a highly unconventional deal that was clearly made for the benefit of another investor and entered into without following basic financial and legal rules. (Zucker firmly argued that RedBird IMI took advantage of what it considered a good business opportunity.)
Zucker and his colleagues are well aware of this risk. If the company fails to recoup its investment, RedBird IMI said it would consider «selling» the loan to RedBird Capital funds.
Regardless of government petrodollars, RedBird Capital will own The Telegraph and The Spectator, along with AC Milan and shares in the producer Skydance Media, producer of the film “Mission Impossible”.
There are problems with this support. The UAE is considered an investor in RedBird Capital funds in addition to RedBird IMI, so any such “sale” could also face the UK's new ban on government ownership of newspapers.
There may also be questions about the valuation, as well as RedBird Capital investors' demands for due diligence information that RedBird IMI is unable to provide in its current form. That's partly because government restrictions prevent The Telegraph from working with the fund.
Still, a domestic deal of one sort or another remains among the half-dozen options available to the fund as it explores its next option. steps, although some form of further sale at a profit would be much preferable.
If nothing else, the intense controversy over The Telegraph's ownership has underscored its continued influence, even as the future of post-print publishing heads toward newspapers. Few midsize businesses could move parliament to act so quickly.
No one knows what price it might have fetched if Zucker's rivals had been allowed to fight him in last year's aborted auction, and it's entirely possible that that the price of trophies can now be higher.
Some people can't wait to find out. Zucker has already discussed proposals in New York, including personally with Sir Paul Marshall, co-owner of GB News, who Zucker said in an interview two months ago is «unfit to own a newspaper.»
In a note for clients last July, media analysts Enders suggested that strong profitability in 2023 could justify a £740m valuation for The Telegraph alone, implying that a stake in The Spectator could be worth £800m. Immediately after the raid on last year's RedBird auction, IMI earned praise in the US media for buying the pair for just £600 million.
There are also arguments for a lower price. Buyers will feel pressured by the seller in RedBird IMI and may try to offer low prices. Difficulties in buying an option to own The Telegraph, rather than the asset itself, were exposed by Zucker's ordeal and could lead to lower rates, as could a lack of financial and legal information. New laws against state ownership are depriving the newspaper industry of an important source of international investment.
The shadow cast by the Barclay family could also lead to discounts. They remain the legal owners in their current form, although they are prohibited by law from exercising any control.
Losing Control
The Barkley family, led by 68-year-old Aidan, is in a difficult situation. After years of infighting and debt-driven growth, their business empire is crumbling.
Yodel, the parcel courier service that had struggled to gain public traction, has been sold and its parent company put into administration by lender HSBC. Online retailer Very, formerly known as Littlewoods, is afloat on a sea of £2.6bn of debt, with two of its creditors infiltrating its board in what many see as a prelude to a debt-for-debt coup.
The Barkley family, led by Aidan Barkley (center), fights to save their business empire. Photo: Oli Scarff/Getty Images
Meanwhile, The Telegraph and The Spectator remain profitable and financially stable, but out of the family's reach due to legal protections introduced by Culture Secretary Lucy Fraser when she launched a public interest inquiry into their deal with RedBird IMI.
The companies are run by independent directors — Mike McTighe, Steve Welch and Boudewijn Wentink — who were initially sent by Lloyds but retained by Fraser after Barclays paid off their £1.2 billion debt. When RedBird IMI formally abandons its takeover bid, their role may end and Barclay family control will be restored.
However, the discovery of independent directors could become another stumbling block on The Telegraph's path to a new owner. It was reported that while the company was in receivership, independent directors, as well as consultants and financial institutions, made suspicious transaction reports to the National Crime Agency. The reports required under the Proceeds of Crime Act were prompted by the movement of large sums of money between The Telegraph and other companies controlled by the Barclay family.
Although The Telegraph newspaper and its operations will not be directly affected, sources say , the potential return of the company to Barclay family control, even temporarily, could trigger a cascade of devastating unintended consequences.
For example, Lloyds remains a creditor of around £60 million to Press Acquisitions Limited, the parent company of The Telegraph and The Spectator. This corporate loan is separate from the £1.2 billion debt repaid by the Barclay family and was never in default.
It is understood Lloyds submitted its own report of suspicious transactions to the authorities last year as part of its insolvency proceedings. If the Barkley family were to regain control, there would be a risk that Lloyds would feel obliged to call in the loan to avoid doing business with them. This, in turn, could jeopardize the financial stability of The Telegraph.
Lloyds declined to comment on whether it had filed a suspicious activity report. A Barclay family spokesman previously said: “The accounts, including those for the year ended 31 December 2022, have been fully reviewed and signed off by PwC.”
In Focus
Convincing potential buyers to accept such conditions. creating a colorful backdrop will be one of RedBird IMI's most important tasks as the company seeks to recoup its costs in the coming weeks.
The sale will be jointly managed by London-based boutique consultant Robie Warshaw and New York-based Raine. , which has built a reputation in transatlantic sports and media deals.
Robie Warshaw's most famous collaborator, George Osborne, had previously enthusiastically and optimistically supported the Abu Dhabi-backed deal, to the temporary disappointment of other advisers who felt there was high political danger.
Andrew Neil, the chairman of the Spectator, who has indulged in a public clash of egos with Zucker, called the former chancellor's work on the proposal «completely bungled» and said it had galvanized the opposition, which was the broadest coalition in British politics «since we've been fighting Nazis.» In a Spectator column after his defeat, Osborne coyly described his role as «finding out who will own this magazine».
However, he continues to position himself for a role in the process, along with the more experienced Sir Simon Robie , whom RedBird IMI considers its main consultant in the firm.
Reign's Joe Ravitch could also star. An Anglophile who spends every summer in London, he has become a figurehead for foreign owners selling high-profile British assets fraught with political difficulties. In the past two years he has sold Manchester United to the Glazer family and Chelsea to Roman Abramovich.
Raine and Robie Warshaw will be looking to spark a bidding war. Most of the likely bidders are already known: Sir Paul Marshall, Daily Mail owner Lord Rothermere, local newspaper consolidator National World, Belgian group Mediahuis and Germany's Axel Springer have shown interest in the aborted first auction.
Of these, Marshall has been one of the most active since RedBird IMI was blocked, visiting Zucker and restarting his bid team. Media analysts believe he and his US investment partner Ken Griffin are willing to pay more than £600 million for The Telegraph and The Spectator, but GB News' baggage and concerns at the top of the Conservative Party about his political intentions pose problems.
< p>However, everyone will face obstacles. Rothermere's DMGT is likely to stumble from competitive issues given its significant share of the national newspaper market.
In lobbying for laws that canceled RedBird's IMI application, it may have also caused itself funding problems. The government has proposed a much stricter regime than that proposed by a cross-party group of peers led by Conservative Baroness Tina Stowell. It is understood the blanket ban on foreign ownership has caused major concern for Rothermere Towers, despite a report in November that DMGT had abandoned plans to part-fund its bid with Qatari money.
Britain's other top newspaper magnate, Rupert Murdoch, also has concerns. His News Corp empire previously relied on investment from Saudi Arabia and had limited information about who was buying its shares in New York. Disputes over the details of the new press ownership law raise another question mark over the continued sale of The Telegraph. The irony that two of his main opponents are now trying to water down legislation they helped craft is not lost on Zucker.
Rupert Murdoch's News Corporation lobbied to weaken foreign property laws. Photo: Mike Seegar/Reuters
Murdoch craves the Viewer, despite his 93 years. However, any attempt by RedBird IMI to auction it separately from The Telegraph would add another layer of complexity
The debt he will sell is secured by a group of companies. Selecting titles should be possible at auction, but would require cooperation between buyers, the sources said. Government assistance in facilitating the conversion of debt into equity as part of the deal will also be critical. These discussions are ongoing.
With uncertainty surrounding it, RedBird IMI auctioneers are hoping to attract newcomers and dark horses. The Livingston brothers, a highly private billionaire couple, signed up to bid last year, it can be revealed. They did not respond to requests for comment.
Former Telegraph editor Sir William Lewis stepped back for the last time after Jeff Bezos named him CEO of The Washington Post. Despite continuing to struggle with annual losses of $100 million, it's possible Lewis and the Amazon founder will seek transatlantic scale alongside their economic recovery efforts.
How to avoid disaster
The path to any such victory is narrow, Rishi Sunak's friends said. say. Independent directors of The Telegraph are not confident in the security of their positions and their role in the further sale.
Their immediate task is to convince RedBird IMI that cooperation is necessary to obtain the rights holder at the right price. (Potential buyers will likely want to see an investigation commissioned by specialist law firm BCL for the company, for example into suspicious activity identified in the accounts.)
Much may depend on Sheikh Mansour's position. The UAE has made no public comment on the controversy, but the recent involvement of US lawyer Marty Edelman in discussions suggests the trial is focusing on the trial among royal lieutenants.
Edelman, of Paul Hastings' firm, is the Sheikh's longtime representative in the West, sits on the Manchester City board and is at the center of the convoluted plans for a soccer stadium in New York that were finally approved last week.
For sure. There will be questions about how Aidan Barclay and Nadhim Zahawi, a former Cabinet minister who had ambitions to become Telegraph chairman, convinced the UAE that the deal would be scrapped. Zahavi declined to comment.
Even after Stowell revealed her amendment and its bipartisan support, political advisers assured Zucker that the deal would not be prohibited by law. Those advisers included former Ofcom chief executive Ed Richards and his firm Flint Global, as well as Sir Craig Oliver of consultancy FGS Global, who was previously No 10 communications director under Lord Cameron and declined to comment.
This turned out to be a disastrous mistake, although Zucker believes his biggest mistake was changing the structure of the deal at the 11th hour in January. This angered Lucy Fraser, who reopened Ofcom's investigation, delaying the process for several weeks and allowing opponents to organize. Perhaps more pertinently, it was perhaps too clever and exposed a gap in passive investment law that ministers felt obliged to plug.
However, RedBird Capital has already moved on to its next, much larger target: Hollywood studio Paramount, which it is pursuing in partnership with Skydance Media.
RedBird IMI, meanwhile, must quickly resell The Telegraph if it is to salvage its hopes of an ambitious global media buyout, potentially including Zucker's former protégé CNN.
Speed is of the essence for The Telegraph, too. Like all newspapers, it is looking to build its digital future as the erosion of its print past accelerates. Making the critical decisions and investments needed to prevent disaster without a supportive long-term owner is nearly impossible. However, the next major steps are likely to come in a few weeks as officials and RedBird IMI try to set ground rules for the new auction.
Complexities and dangers lurk in all directions of a situation in which neither party, neither Redbird IMI, the Barclay family, The Telegraph or the government have complete control. Next year The Telegraph will turn 170 years old. At least she survived the worst.
Additional reporting by James Warrington
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