As the shock news of a probable sale spread through the newsroom at the Telegraph, an air of optimism broke out among its journalists.
It was perhaps not the reaction you might have expected when the future of one of the UK’s biggest and most influential newspapers had been thrown into uncertainty for the first time in almost two decades. But many among the 1,000 staff employed by the papers have long felt that being owned by the billionaire Barclay family had hamstrung the growth potential of its titles, which in recent years have increasingly got their mojo back as the newspaper industry has come to grips with the challenge of digital media.
“The atmosphere is buoyant. A sale is good news for us, it’s exciting,” said one source at the Telegraph. “The biggest problem is ownership. They haven’t put a penny in: the success is from [organic] growth. You want a backer who is going to invest. We are part of a very complicated financial structure with lots of cash pledged all over the place.”
The behind-the-scenes financial stress within the complex arrangement of offshore holding companies utilised by the Barclay family was suddenly thrust into the spotlight on Tuesday, when Lloyds Banking Group moved to seize control after failing to resolve a long-running dispute over £1bn in loans.
By Wednesday afternoon, Lloyds’s receivers, AlixPartners, had removed directors from the parent companies of the newspaper group, including chair Aidan Barclay, 67, his brother Howard, 63, and Philip Peters, who has worked for the family for decades.
The complicated process that has resulted in Lloyds taking control of the Telegraph began on 15 May, when documents show that its receivers took control of B.UK, a Bermudian-based company that acts as the ultimate parent for the newspapers and the Spectator magazine.
Lloyds described the move as an “act of last resort”, having had its hand forced after failing to get the Barclays to make a viable financial offer. One City source said the bank had been trying for the best part of two years to solve the debt issue.
The Telegraph now finds itself at the most critical commercial juncture since Sir David and Frederick Barclay paid a rich £665m to knock out rivals and secure ownership of the titles in 2004. The titles have a book value of £140m in the latest financial results filed by the Barclays.
“Things moved very quickly, but the interesting thing is there hasn’t been any panic at all,” said a second source at the broadsheet. “It is a significant moment, obviously, but it feels calm. There is interest, not worry.”
The reason for confidence at the Telegraph is that despite the tangle its owners find themselves embroiled in, the group is in better shape than in recent years as a digitally focused subscription strategy increasingly bears commercial fruit.
In 2018, the first full year of chief executive Nick Hugh’s tenure, the Telegraph made £900,000 profits and reported 363,000 subscribers, of which 61% were print subscribers. The most recent public filings show that at the end of 2021 the Telegraph made £40.4m of adjusted underlying profits and had 720,000 subscribers, of which 76% were digital.
“Nick Hugh has done a good job on profits and margins,” says Alex DeGroote, a media and tech analyst. “Some people may not agree with its politics, but as a business it is increasingly profitable and doing well.”
That raises the question of who may want to buy the Telegraph – a last-gasp debt deal from the Barclays notwithstanding – and who may be considered palatable to regulators.
“The Telegraph is one of the trophy newspaper assets in the world. A sale like this doesn’t happen very often, it is a deeply symbolic moment for the media landscape in the UK,” says DeGroote. “There are two types of buyers. A billionaire or consortium of wealthy individuals, or a philanthropist, who could run it on a money-is-no-object basis. That could see massive expansion and take the Telegraph from having to be disciplined and profitable to being Chelsea, to use a football analogy. The second type of buyer is an existing industry player.”
The first camp could include sovereign wealth funds, particularly those linked to Gulf states such as Saudi Arabia, as well as individuals such as billionaire Paul Marshall, the Brexit-backing hedge fund co-founder, and also backer of GB News.
However, while the prestige and influence of owning a crown-jewel British media title is likely to draw significant interest, Lloyds and its investment bankers will be well aware of the risks some suitors pose.
Almost 15 years ago, billionaire Alexander Lebedev acquired the Evening Standard and the Independent – becoming the first Russian oligarch and former member of a foreign intelligence service to own a major British title, in deals that failed to trouble UK regulators. However, times have changed and three years ago the government launched an investigation into the sale of stakes in the Independent and the Evening Standard, which are now controlled by Alexander’s son Evgeny, to an investor with strong links to Saudi Arabia. The then culture secretary, Jeremy Wright, had been unpersuaded by Lebedev’s guarantees that editorial independence would not be compromised.
While that investigation did not go ahead, after the Competition Appeal Tribunal ruled that the government had issued its intervention notice too late, some believe the government’s move set a precedent that Lloyds and its investment bankers would be well advised to heed when the bids roll in.
For its part, Lloyds is now seeking an independent chair for the Telegraph’s parent company, to prove it has no intention of meddling with the day-to-day running of the paper while it moves to prepare for a sale.
“The whole thing is shot through with politics. The Telegraph is the voice of the centre-right in this country – they will have to be reputationally mindful of those buying for influence,” says DeGroote. “There would of course be safeguards and due diligence over things like source of funds in place, but I don’t think the Telegraph sale would prompt the government to take a ‘golden share’ to protect it, as it might with, say, a BT or ITV takeover.”
The second camp of buyers is existing industry players seeking scale.
Rupert Murdoch’s News UK, owner of the Times, Sunday Times and Sun, would be highly unlikely to be able to buy the Telegraph due to competition concerns, but has been suggested as a contender for the Spectator.
Others that may make a move include Belgian group Mediahuis; National World, owner of the Scotsman and the Yorkshire Post; Axel Springer, the German group that lost out to the Barclays in 2004 and attempted to buy the Financial Times in 2015; and Will Lewis, a former editor of the Telegraph and ex-News UK executive, who is expected to enter any process with private backing.
“It is still a first-class asset and publication, and is performing well,” says one media executive involved in preparing a bid when the Telegraph titles were put up for sale in 2019 as part of a bitter family feud. “But everything depends on price. Figures of £500m or £600m being talked about are still very hefty – probably twice what people would expect given its profits.”
The favoured industry contender is Lord Rothermere, who controls the parent of the Daily Mail, MailOnline, i and Metro. He has long eyed an eventual move for the Telegraph and previously expressed an interest in a deal.
However, any deal would mean his Daily Mail & General Trust group (DMGT) swelling to the size of market leader News UK and immediately facing a competition review.
In 2021, immediately after taking DMGT private, Rothermere created a new consumer media division, Harmsworth Media, separate to the core Mail titles, shifting the i and New Scientist magazine into it.
“Being off the stock exchange and creating siloed companies looks like what you might do if you had a long-term eye on another media asset that might face a plurality review and you wanted to show editorial independence from the Mail,” said one source.
It is understood Rothermere has previously considered a plan where DMGT and a consortium of buyers acquire the Telegraph, with him taking a minority stake that would help get a deal through regulatory scrutiny.
“It would be hard for Rothermere to avoid getting involved,” says DeGroote. “This could be a once-in-a-lifetime opportunity to consolidate the Mail and the Telegraph. He has had plenty of time to prepare a structure that could make a deal work. In the end, it looks like this is going to be a one-off opportunity to buy a pretty unique asset.”
