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Rishi Sunak has tried to block the takeover of the Telegraph by Abu Dhabi-backed RedBird IMI by changing the law to stop a foreign state buying a British news organisation.
The UK prime minister has proposed changes to legislation going through parliament to, in effect, prevent any foreign state from owning or having influence or control over a British newspaper.
The plans were outlined on Wednesday by Lord Stephen Parkinson, culture minister, in the House of Lords.
The proposals would “amend the media merger regime explicitly to rule out newspaper and periodical news magazine mergers involving ownership, influence or control by foreign states”, Parkinson said.
Any deal involving a foreign state would be vetted by the Competition and Markets Authority, and then blocked or unwound if the regulator found the country would have influence or control over a British media group.
He added that the “broad definition” of state influence would include officers of foreign governments acting in a private capacity and investing their private wealth.
The legislative proposal means RedBird IMI’s £600mn takeover of the Telegraph Media Group would probably be blocked as it stands, according to people close to the deal, since Abu Dhabi has provided about three-quarters of RedBird IMI’s cash.
IMI, the Abu Dhabi vehicle behind RedBird’s joint venture, is controlled by Sheikh Mansour bin Zayed Al Nahyan, a vice-president of the UAE who owns Manchester City Football Club. RedBird IMI declined to comment.
Downing Street has faced pressure from Conservative MPs to block the deal, which includes the Spectator magazine.
“We have listened carefully to the arguments made by parliamentarians in recent weeks,” the government said, adding that the amendment would provide “additional protections for a free press, a pillar of our democracy and a priority for the government.”
RedBird IMI will now need to decide whether to bring in new money to significantly dilute the Abu Dhabi stake or simply seek to sell the newspaper, as well as the Spectator.
It struck a deal to buy the media group from Lloyds for about £600mn after the bank seized control from the Barclay family over unpaid debts. However, completion of the deal was held up by an initial regulatory probe.
Previous bidders for the Telegraph have approached RedBird IMI with offers of investment.
Several media groups and investors registered interest in the Telegraph before RedBird IMI agreed the deal last year. They included hedge fund millionaire Sir Paul Marshall and DMGT, the group that owns the Daily Mail. Rupert Murdoch’s News Corp is also interested in buying the Spectator.
The amendment would be voted on at the next reading of a digital markets bill that is going through parliament, which would mean it could be passed within weeks.
A low foreign state-ownership threshold is expected to be set to allow only small passive stakes, such as those typically held by the Norwegian sovereign wealth fund, according to a person close to the situation.
The proposed changes to the law displaced an amendment to the digital markets bill from Conservative peer Baroness Tina Stowell, who pushed for parliament to have powers to veto a foreign state buying a British news organisation.
Stowell on Wednesday withdrew her amendment, which had widespread support from peers across party lines.
The intervention by Sunak came after two regulators scrutinising RedBird IMI’s takeover of Telegraph Media Group submitted their initial findings to culture secretary Lucy Frazer on Monday.
The recommendations by media watchdog Ofcom and the CMA will remain confidential until Frazer has decided whether to allow the deal to proceed or to refer it to the competition watchdog for an in-depth “phase 2” inquiry.
Such an inquiry would probably delay a final decision on the deal until after Sunak’s amendment becomes law.