Bidders for the Telegraph are concerned the Barclay family’s £1bn “back door” offer could have a “chilling effect” on the official auction, according to a source close to the process.
On Monday, the Barclays confirmed that they would make a £1bn Middle Eastern-backed offer to keep control of the Telegraph and Spectator titles. The business was seized by Lloyds bank in June after the family failed to reach an agreement over unpaid debt, at a hearing in the British Virgin Islands.
At the public hearing instigated by Lloyds in an effort dissolve a Barclay holding company to further ringfence the media titles from any potential future court wrangling after the sale, lawyers for the family said a deal to buy the titles could be done in just 15 days.
The auction, which is being run by the US bank Goldman Sachs and directors for the parent companies of the Telegraph and Spectator, and is chaired by Mike McTighe, is aiming to strike a deal with a successful bidder by the end of January.
However, for a number of bidders, subsequent regulatory clearances are likely to drag the completion process on for many more months.
The Barclay family’s lawyers told the liquidation hearing that the £1bn offer – 83% of the £1.14bn debt outstanding with Lloyds – was only available via the debt repayment deal and not through an auction bid process.
“It is a back-door deal that could have a chilling effect on the auction,” said an executive involved in one of the potential bids. “Why should bidders offer 30% to 40% more [than the estimated value of the Telegraph by analysts] at auction to match a side deal?”
The court was told that the funding would be provided in cash by a “well-respected member of the UAE royal family”, but lawyers said the name of the individual would be provided only confidentially to Lloyds’ lawyers or the court.
The involvement of backers from the Middle East is a sensitive issue. Lloyds, the government and regulators are acutely aware of the potential of a loss of control, or influencing of editorial content, of a foreign-owned Telegraph and Spectator.
Reports have indicated that Lloyds may consider only offers where less than a quarter of funding comes from the Middle East.
When Lord Rothermere’s DMGT, the owner of titles including the Daily Mail, was revealed to be tapping Middle Eastern investors, the company was quick to clarify that it would have to retain a “majority of economic and equity risk, and the control needed to invest in the business and protect its editorial independence”.
The media regulator, Ofcom, is also evaluating whether foreign funding sources may pose a risk to freedom of speech as part of its regulatory scrutiny of any deal.
In 2019, the government launched an investigation into the sale of stakes in the Independent and Evening Standard to an investor with strong links to Saudi Arabia.
“It may be the case that the public-interest considerations of freedom of expression and accurate news reporting are relevant to this merger,” said Jeremy Wright, the culture secretary at the time.
