Abu Dhabi-backed newspaper buyout sparking panic

DUBAI, United Arab Emirates — Mansions, university facilities, think tanks, sports teams — the U.K. is no stranger to Gulf money and multibillion-dollar investments streaming from Qatar, the United Arab Emirates and Saudi Arabia into British institutions.

But newspapers? That’s a hard stop, apparently. The latest investment pursuit flowing westward from one of the U.K.’s close Gulf allies, the UAE, has thrown British lawmakers, journalists and even former intelligence officials into a frenzy.

Just on Wednesday, Britain’s government announced it would change its laws to stop foreign governments from being able to own the country’s newspapers, potentially throttling a controversial Emirati ownership bid for one of the U.K.’s most influential papers.

More than 100 members of Parliament have signed a letter opposing the buyout of major British newspaper the Telegraph and news magazine, The Spectator, by UAE government-backed investment fund RedBird IMI. Long a favorite of Britain’s Conservative Party, ownership of the 168-year-old daily is not just about profit, but about power.

The purchase would be backed by UAE Vice President Sheikh Mansour bin Zayed Al Nahyan, and would reportedly entail paying off some £1.2 billion ($1.53 billion) in debts owed by the paper’s current owners, the Barclay family, to Lloyds Bank. The deal would ultimately see the Telegraph, which is valued at a reported £600 million, come under full Emirati ownership.

For many in the U.K., the takeover presents a dangerous threat to free press in the country. Lawmakers have been scrambling to introduce a new law that would enable Parliament to veto buyouts of news outlets by foreign governments.

“If major newspaper and media organisations can be purchased by foreign governments, the freedom of the press has the potential to be seriously undermined,” the Parliament members wrote in a letter to the U.K.’s secretary of state for culture, media and sport, Lucy Frazer.

“No other democracy in the world has allowed a media outlet to be controlled by a foreign government. This is a dangerous Rubicon we should not cross.”

Some observers have pointed out that that rubicon has already been crossed, albeit it’s a much more gray area: London’s Evening Standard newspaper is owned by Russian-British businessman Evgeny Lebedev, whose father was a member of Russia’s intelligence service, the KGB. Former Prime Minister Boris Johnson gave Lebedev a seat in Britain’s House of Lords, despite protests and concerns from senior government officials about the Lebedevs’ links to Russia.

Alexander Lebedev, Evgeny’s father, was put under Canadian sanctions in 2022, accused of “directly enabling” Russia’s war in Ukraine. For his part, Evgeny Lebedev has strongly denied assertions that he is a “security risk,” writing in a March 2022 article, “I am not some agent of Russia.”

In response to the U.K.’s legal amendments, RedBird IMI said it was extremely disappointed and was evaluating its next steps, Reuters reported Wednesday.

Rival bids for the Telegraph include Rupert Murdoch’s News UK and Paul Marshall, hedge fund billionaire and co-owner of GB News — both of which are seen to have a clear right-wing leaning.

RedBird IMI, a joint venture between American private equity firm RedBird Capital Partners and Abu Dhabi-based International Media Investments (IMI), was launched in late 2022 and is led by former CNN Chief Executive Jeff Zucker.

The joint venture’s backers have furnished Zucker with a $1 billion war chest in the hope that the longtime media executive can hunt down profitable investments across the worlds of news, entertainment and sports. Abu Dhabi’s IMI committed 75% to the venture, or $750 million, with RedBird Capital providing the rest.

The UAE’s Sheikh Mansour is the ultimate backer and beneficiary of the fund, excluding the shares of RedBird Capital founder Gerry Cardinale, Zucker and other private partners or shareholders. Sheikh Mansour is vice president and deputy prime minister of the UAE, chairman of the country’s mammoth state-owned Mubadala Investment Co., which oversees $276 billion in assets, and owner of English Premier League soccer club Manchester City.

RedBird IMI has been on a spending spree, most recently signing a £1.45 billion deal to acquire British production house All3Media, the creator of hit shows like “Squid Game: The Challenge” and “Fleabag.”

But it’s faced regulatory probes and delays in the U.K. over its bid for the Telegraph.

To Mazen Hayek, a Dubai-based media consultant and former spokesman at Saudi-owned media company MBC Group, the whole controversy is overblown.

“The acquisition bid for The Telegraph and The Spectator by RedBird IMI aligned with the UAE’s legitimate soft power and global influence goals. It included a firm commitment to uphold the publications’ managerial independence and editorial integrity,” Hayek told CNBC.

He cited political probes, protectionism, double standards and “business Islamophobia” as leading to the apparent U.K. ban on foreign media acquisitions.

“This raises questions about the U.K. government’s consistency and its stance on foreign investments, especially when compared to the ownership, for example, of prominent U.K. sports clubs by foreign investors,” Hayek added.

The Telegraph purchase is more sensitive, U.K. lawmakers argue, because of its potential impact on press freedom, given that free press and opposition to the government are not permitted in the UAE. The Gulf sheikhdom is ranked 145th in the world out of 180 countries for press freedom, according to Reporters Without Borders.

“You cannot separate sheikh and state,” Conservative MP Alicia Kearns said of the deal in January.

CNBC has contacted IMI and RedBird Capital Partners for comment. In a November interview with the Financial Times, Zucker accused the Telegraph’s rival bidders of “slinging mud” and vowed to maintain the newspaper’s editorial independence.

For Taufiq Rahim, a Dubai-based senior fellow in the Future Security program at the think tank New America, the more pressing issue is print newspapers disappearing altogether.

“While governments may restrict foreign ownership of the press, the real risk is that newspapers simply go out of business and out of print,” he told CNBC.

“If the law is passed, the competition of Gulf governments for traditional media will simply move to seeking ownership of new media platforms and social media.”