UK media muddle is fresh turn-off for foreign cash

Foreign Direct Irony. Trebles all round at the Telegraph. The right-wing UK publication now looks likely to escape ownership by the United Arab Emirates-backed RedBird IMI, after Prime Minister Rishi Sunak hurriedly mobilised legislation on Wednesday preventing foreign states from owning UK media assets. While the ironies in the affair are sufficient to fill an entire broadsheet, the main headline is likely to be a further hit to the appeal of UK assets to foreign investors.

RedBird IMI, led by ex-CNN boss Jeff Zucker, secured an option to buy the Telegraph and Spectator after lending 600 million pounds to the newspapers’ previous owners, which enabled them to repay debts owed to Lloyds Banking Group. But lawmakers from Sunak’s own Conservative Party cried foul, pointing out that IMI owner Sheikh Mansour bin Zayed al Nahyan is deputy prime minister of the UAE, not noted either for its liberal democracy or its free press. Exploiting the UK prime minister’s weakness amid negative polls, they shifted the debate from the impact of RedBird’s takeover on competition to whether foreign state-linked investors should be allowed to acquire domestic media assets at all.

On that substantive point, British politicians have grounds to act. IMI’s role as a limited partner in a private equity structure gave credence to its claimed status as a financial investor. The buyers also trumpeted their commitments to editorial independence. But it’s possible to see why some struggled to differentiate between a deal involving Sheikh Mansour the private investor and one featuring the UAE. Acting now also shouldn’t make the UK a complete outlier. France classes media as one of a group of strategic assets, and requires non-European Union buyers of listed company stakes exceeding 10% to get state approval.

Blocking RedBird doesn’t necessarily imperil further investment in the UK from the oil-rich UAE, either. It certainly strikes a weird note – the Abu Dhabi Investment Authority part-owns British utility Thames Water, and the similarly state-held Emirates Investment Authority holds 14% of $23 billion British telco Vodafone. But unlike the 10 billion pounds of state funds it agreed in 2021 to pump into the UK, the UAE government sees Sheikh Mansour’s investment as a private one, according to a person familiar with the situation.

The UK still has a problem, though. The antics of the Boris Johnson and Liz Truss governments, which took in breaking international law, proroguing parliament and crashing the economy, will have already given suppliers of foreign direct investment pause for thought. That’s risky for a moderately sized open economy. Resolving to block future foreign state takeovers of domestic media via a normal legislative process encompassing proper consultation might not have made things worse. Frantically tweaking laws to block pre-existing M&A to suit the incumbent government’s short-term political needs, in contrast, probably does.

(Article co-authored by Karen Kow)