Laws to allow UAE stake in The Telegraph approved by Lords
Peers agreed to allow foreign states to take passive shareholdings in British newspapers of up to 15pc.
The move prepares the ground for the end of more than two years of damaging limbo for The Telegraph, which has effectively operated without an owner since June 2023.
Lords on Tuesday evening voted through a statutory instrument proposed by the Government to ease an existing outright ban on newspaper investments by foreign powers.
Peers rejected a rare 'fatal motion' tabled by the Liberal Democrats that attempted to block the legislation. The motion, which would have controversially overturned a vote in the House of Commons, was defeated by 267 votes to 155.
Gerry Cardinale, the founder of RedBird Capital, the US private equity firm in line to become the controlling shareholder in The Telegraph, said: 'Today marks an important milestone that provides the clarity we need to press ahead with RedBird Capital's acquisition of The Telegraph.
'With legislation now in place, we will move quickly and in the forthcoming days work with DCMS [the Department for Culture, Media and Sport] to progress to completion and implement new ownership for The Telegraph.'
A well-attended upper chamber heard arguments that the statutory instrument undermined the intention of the outright ban introduced last year to block an attempted takeover of The Telegraph.
The decision opened a diplomatic rift with the UAE, which ministers have been attempting to close, including in a visit to Abu Dhabi by Sir Keir Starmer in December.
The blocked bid was majority funded by IMI, a media company controlled by Sheikh Mansour bin Zayed Al Nahyan, the vice president of the UAE, which prompted a cross-party outcry over press freedom.
The UAE positioned itself to take control by repaying the overdue debts of the Barclay family, the previous owners, but did not reckon on a change in the law. There followed a year during which IMI tried to exit its investment in an auction which failed to deliver a bid able to match its price.
In May Lisa Nandy, the Culture Secretary, announced plans to treble the limit on foreign state investment to 15pc. Prior to the general election, Conservative ministers proposed a limit on foreign state investment of just 5pc to protect press freedom.
Ms Nandy said the shift was necessary to allow publishers greater access to sovereign wealth investment as they attempt to negotiate the decline of print newspapers.
Baroness Twycross, her junior minister in the Lords, this evening said: 'The far greater risk is how UK news media faces significant, genuinely existential challenges as their business models move away from print towards digital, and new technologies emerge.
'Whilst it is vital we support stronger protections for UK newspapers and other news media, we need to make sure we don't inadvertently make it harder for newspaper groups to survive.'
The Conservative Lord Black of Crossharbour, and deputy chairman of Telegraph Media Group, backed the Government.
He warned: 'It really is five minutes to midnight for much of the British press ... the passage of these regulations is absolutely vital to the future of the British press.'
The Telegraph last year reported a 35pc increase in operating profits to £54m on a turnover of £278m, up 5pc.
Lord Fox, the Lib Dem business spokesman behind the fatal motion, said: 'Whether the Government is trying to deliver capital to the sector or it is mending a diplomatic fence, in doing so they are parlaying foreign influence. Whatever the side-deals, they are not worth the cost of press freedom.'
He was supported by a group of 41 Conservative peers who went against the party's policy of supporting the legislation. The rebellion was larger than expected.
Their leader, Lord Forsyth, said: 'It is completely unacceptable that our parliamentary procedures should be overridden and that we should create an open door for foreign governments to get into our media.
'If we have foreign governments owning newspapers … that will mean there is a conflict of interest between our journalists and their proprietors. Between journalists who might want to write unpleasant things about some regimes.'
Peers appeared to ease the ban with some reluctance. The Tory peer Baroness Stowell of Beeston, who played an influential role in forcing action against the UAE bid for The Telegraph prior to the general election last year, criticised the Labour Government's subsequent handling of the 'sorry saga'.
Her 'motion of regret' rebuked ministers for a loophole in the statutory instrument which could allow multiple foreign powers to take stakes of up to 15pc each.
She said: 'What I find so frustrating is it's taken the Government a year to get to this point. And we still need a further set of regulations to be laid out to address the serious loophole.
'This foot-dragging and apparent incompetence have given rise to legitimate questions about who or what has really influenced the Government in its approach to this incredibly important matter.
'If the Government were acting only in the interests of the press industry, we would have got all this sorted and the ownership of The Telegraph long before now.'
But Lady Stowell argued that if the 15pc limit is properly enforced, it will allow investment in newspapers at a critical time.
She said: 'While I respect those who are framing this debate as a battle about the future of press freedom, actually, if it's a battle about anything, it's over the future of a financially viable press. We don't just need our newspapers to be editorially independent, we need them to survive.'
IMI is now expected to become a passive minority investor in the £500m takeover of The Telegraph by RedBird, meaning it will have no governance rights and be unable to appoint directors. The Government will be obliged to intervene and could unwind the deal if it is found to have sought influence.
RedBird was the junior financial partner in last year's blocked attempt, but has since agreed to increase its outlay to become the controlling shareholder.
Mr Cardinale has also lined up British minority investments from the Daily Mail publisher Lord Rothermere and Sir Leonard Blavatnik, the owner of the sports streaming service Dazn.
Ms Nandy is expected to trigger an initial investigation by the media regulator Ofcom of its potential impact on the public interest and by the Competition and Markets Authority of its compliance with the new foreign state investment regime.
Their findings will inform Ms Nandy's decision weeks later on whether to demand more in-depth scrutiny, taking about six months. That would mean The Telegraph would not be under new ownership until next year.
Lord Fox and Lady Stowell urged the Government to fully scrutinise RedBird's deal. It has faced attacks from Conservatives, including Sir Iain Duncan Smith over the longstanding business links to China held by John Thornton, RedBird's chairman.
After his motion to block the legislation was defeated, Lord Fox said: 'The Government's move to force through this legislation in the face of historic cross-party resistance is reckless.'
He said the Lib Dems would 'hold the Government's feet to the fire and limit the damage in any way we can'.
RedBird is expected to continue to develop ambitious investment and growth plans for The Telegraph as it navigates the regulatory process.
Mr Cardinale said: 'At 170 years old, The Telegraph is one of Britain's most iconic cultural institutions and frankly should be one of its greatest cultural exports.
'But The Telegraph can't rely solely on that heritage. If it doesn't proactively look to innovate and find new ways to grow and diversify its subscriber base and other revenue-based verticals, its relevance and important leadership position in the UK and globally will be severely challenged.
'RedBird is the right owner at the right time in this critical fork in the road for The Telegraph.
'RedBird is well-capitalised, has a track record in owning and growing iconic intellectual property businesses, and importantly has a track record in being 'talent-friendly' while also embracing financial growth.'
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