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UK Curbs on Foreign Media Control Threaten Telegraph Deal

(Bloomberg) -- Rishi Sunak’s government is working to ban foreign states from controlling or influencing UK newspapers and news magazines in a move that threatens a UAE-linked group’s deal for the Telegraph newspaper.

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Speaking in the House of Lords, Culture Minister Stephen Parkinson said the country would amend its laws to rule out newspaper and magazine deals that involve “ownership, influence or control by foreign states.” He said the target is explicitly “foreign state ownership” and therefore would not rule out foreign companies, such as Rupert Murdoch’s News Corp., from continuing to own UK papers.

The proposal, which is still subject to a vote in the House of Lords and House of Commons before it becomes UK law, comes amid growing disquiet in Parliament about the takeover of the nearly 170-year-old Daily Telegraph newspaper and the Spectator magazine by investment vehicle RedBird IMI. The investor is backed by the United Arab Emirates Deputy Prime Minister Sheikh Mansour bin Zayed Al Nahyan, who’s made a number of acquisitions in the UK in recent years.

Parkinson declined to comment explicitly on the Telegraph takeover, which is currently being considered by the government. He also said the ban on foreign state ownership would not apply to broadcasters or digital media.

“We are extremely disappointed by today’s development. To date, RedBird IMI has made six investments across the UK and US, and we believed the UK’s media environment was worthy of further investment,” RedBird IMI said in an emailed statement. “We will now evaluate our next steps, with commercial interests continuing to be the sole priority.”

RedBird IMI agreed to buy UK TV production house All3Media in February, and Sheikh Mansour also owns a majority stake in Manchester City Football Club. A representative for the Telegraph declined to comment.

The Telegraph, which consistently endorses the UK Conservatives and has close ties with its leadership, is widely considered a party mouthpiece. The prospect of a new owner linked to a foreign government has caused an uproar and a slew of peers criticized the deal in the chamber on Wednesday.

“This bird cannot fly,” said Conservative peer Michael Forsyth, who was a Cabinet minister under ex-premier John Major. Forsyth accused RedBird IMI of pursuing an “influence strategy.”

“Money talks and ownership matters,” he said. “The very idea of an autocratic state with a poor record on human rights owning or holding any influence in a major British daily newspaper to me is just utterly surreal.”

Still, Parkinson said the government wanted to ensure the proposal does not have “undesired effects” on wider business investment in UK media, including passive investments made by sovereign wealth funds. Ministers will set out secondary legislation to give more details on the “very low threshold up to which they may be permitted to invest.”

Read more: News Corp. Said to Mull Bid for Telegraph Owner With Rivals

Currently, takeovers can be blocked by the UK Secretary of State if they raise concerns around competition, media plurality or national security. On Monday, Culture Secretary Lucy Frazer was handed reports from the Competition and Markets Authority and media regulator Ofcom, after she referred the RedBird IMI deal for an initial investigation.

She is expected to make a decision on whether to refer the deal for an in-depth investigation next week.

The government’s proposal comes in response to a move by Conservative peer Tina Stowell to try to change the Digital Markets, Competition and Consumers Bill, which is currently passing through Parliament, to ban a “foreign power” from acquiring a media or news organization “in any form.” Directly referencing the Telegraph bid, she told the House of Lords that “allowing foreign governments to own such a critical and sensitive part of our nation would damage public confidence in all of us yet further, if it was allowed to happen.”

After Parkinson’s statement, Stowell agreed to withdraw her proposal.

Bloomberg previously reported Murdoch’s News Corp. and Daily Mail publisher Daily Mail & General Trust Plc had weighed a proposal which would reduce RedBird IMI’s ultimate ownership stake in the Telegraph.

--With assistance from Benoit Berthelot.

(Updates with comment from RedBird IMI in fifth paragraph and additional details throughout. A previous version corrected the spelling of Michael Forsyth’s name.)

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