Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A crucial amendment to the law that prevents foreign ownership of British newspapers in the wake of the blocked Telegraph takeover has failed to be agreed after missing out on the pre-election “wash-up” period in parliament.
Ministers and officials had been consulting on a clause that would allow foreign states to acquire small stakes in newspaper groups — expected to be set at 5 per cent — in order to allow smaller, passive investment from sovereign wealth and state pension funds.
The amendment was to be made in the Digital Markets, Competition and Consumers Bill, which was passed on Thursday by the UK parliament.
However, the amendment missed out on the passage of the bill, which was rushed through before parliament is suspended ahead of the general election on July 4.
The legislation as passed focuses on reining in the power of Big Tech companies and giving greater oversight to the UK competition watchdog.
MPs, peers and newspaper bosses had fiercely debated the 5 per cent stake threshold after Rishi Sunak’s government moved to block the sale of the Telegraph Media Group to Abu Dhabi-backed RedBird IMI.
Parliamentarians were concerned that a US-managed fund that derives about three-quarters of its funding from Abu Dhabi would give the UAE undue influence on free expression and media freedom in the UK.
Without the amendment, the law will in effect block any state ownership of a newspaper group, a prospect that will concern newspaper bosses who want the opportunity to attract at least partial investment in future from the cash-rich states in the Middle East and the Gulf.
Media groups are also concerned that the law will deter pension funds with overseas public sector money, such as the vast Canadian and Australian funds, from becoming shareholders.
As it stands, the law would also probably block a sovereign wealth fund from acquiring a stake in a publicly listed company, such as regional newspaper group Reach PLC.
Norway’s sovereign wealth fund already owns small stakes in listed UK newspaper groups, for example, although the law does not apply retrospectively.
The amendment will now need to be made in secondary legislation after the general election, according to people with knowledge of the process, with a consultation into the exact threshold also to be extended until then.
The consultation period was due to close at midnight on Friday but will now end on July 9.
The next government will need to choose to set the threshold at 5 per cent, a different level or not at all.
The failure to agree to the change to the law is not expected to affect the timing of the sale of the Daily Telegraph and Sunday Telegraph newspapers and Spectator magazine, according to people familiar with the matter, because any deal is likely to conclude after July 4.
Many of the bidders that have registered interest — including DMGT, the group that owns the Daily Mail, Rupert Murdoch’s News UK and hedge fund boss Paul Marshall — are also likely to face scrutiny from the competition and media regulators.
RedBird IMI has asked for expressions of interest from potential buyers, with initial responses suggesting more than three dozen groups could bid for the UK media group, according to two people close to the process.
First-round bids are likely to be called in coming weeks. Investment banks Robey Warshaw and Raine Group are advising on the sale.
RedBird IMI is aiming to recoup the £600mn used to buy debt behind the group, which could have been converted into equity ownership, from Lloyds Banking Group.
Culture secretary Lucy Frazer has asked RedBird IMI to keep her informed about the progress of the sale, including during the election campaign.
Additional reporting by Anna Gross in London
