(Bloomberg) -- The UK has ordered an investigation into the proposed acquisition of the Telegraph newspaper by a vehicle backed by Abu Dhabi’s Sheikh Mansour Bin Zayed Al Nahyan, the latest twist in a battle to control the famed conservative media brand.
Culture Secretary Lucy Frazer has decided to issue a Public Interest Intervention Notice regarding a deal which would see media investment venture RedBird IMI take control of the Telegraph, citing the need to ensure “the accurate presentation of news and free expression of opinion in newspapers.”
The notice triggers studies by media regulator Ofcom and the antitrust watchdog, the Competition and Markets Authority, both of which will report their findings by Jan. 26. Frazer can then block the deal, impose conditions, or allow it go through.
The move adds to the uncertainty over who might ultimately own the Telegraph. While the structure of the probe suggests it will be possible for the Barclay family to pay back their loans to Lloyds Banking Group Plc with RedBird IMI funding and reclaim the title, the investment vehicle’s intention to subsequently convert its loan into ownership of the paper is now in limbo.
A letter from Frazer’s department to RedBird IMI said her decision reflected concern about the potential influence that “a member of the UAE government” could exert on the Telegraph’s operations through Mansour’s International Media Investments despite RedBird IMI’s representations that it would make a legally binding undertaking to the government that IMI would be a “fully passive investor.”
That may hearten rivals including hedge fund moguls Paul Marshall and Ken Griffin, plus British media baron Jonathan Harmsworth, who are also vying for control and now have more time to fuel opposition to the deal.
The struggle over who owns one of Britain’s most famous newspapers is as much about power and influence as it is about money. The Telegraph has close connections with the ruling Conservative Party, earning it the nickname “The Torygraph.” Winston Churchill and Boris Johnson have both written for it. The probe only applies to the Telegraph Media Group not the Spectator magazine, which the Barclay family are also looking to reclaim.
A RedBird IMI representative didn’t respond to a question over whether it would pursue ownership of the magazine in the short term.
RedBird IMI is a joint venture between New York-based RedBird Capital Partners and Sheikh Mansour-backed International Media Investments. The venture and IMI have combined to offer loans of about £1.2 billion ($1.5 billion) to the Barclay family, who had the Telegraph and Spectator magazine seized from them by Lloyds Banking Group Plc in June after they failed to repay debts totaling the same amount.
The Barclay family’s debt to Lloyds can now be repaid with that credit, a windfall for the bank that has previously written them off.
The second phase of the acquisition involves RedBird IMI, which is headed by former CNN boss Jeff Zucker, converting its loan of about £600 million secured against the Telegraph and Spectator into equity. The group previously said it planned to exercise this option quickly.
A RedBird IMI spokesman on Thursday reiterated that “any transfer of ownership will of course be subject to regulatory review.”
IMI will secure the remaining £600 million loan against other assets owned by the Barclay family.
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