Buying subsidized newspapers from Abu Dhabi sparks panic

DUBAI, UNITED ARAB EMIRATES – Palaces, university facilities, think tanks, sports teams – the UK is no stranger to Gulf money and the multibillion-dollar investments flowing from Qatar, the UAE and Saudi Arabia to British institutions.

But newspapers? That's a tough stop, apparently. The latest investment pursuit flowing west from one of the UK's close allies in the Gulf, the United Arab Emirates, has sent British lawmakers, journalists and even former intelligence officials into a frenzy.

The British government announced on Wednesday that it will change its laws to prevent foreign governments from owning newspapers in the country, potentially stifling a controversial Emirati ownership bid for one of the UK's most influential newspapers.

More than 100 MPs have signed a letter opposing the purchase of major British newspaper The Telegraph and news magazine The Spectator by UAE government-backed investment fund Red Bird IMI. A long-time favorite of the British Conservative Party, ownership of the 168-year-old daily newspaper is not just about profit, but about power.

The purchase will have the support of UAE Vice President Sheikh Mansour bin Zayed Al Nahyan, and will reportedly require the repayment of around £1.2 billion ($1.53 billion) of debt owed by the newspaper's current owners, the Barclay family, to Lloyds Bank. The deal will eventually see The Telegraph, valued at around £600m, come under full Emirati ownership.

For many in the UK, the takeover represents a serious threat to press freedom in the country. Lawmakers are scrambling to introduce a new law that would enable Parliament to veto foreign governments' purchase of media.

“If foreign governments could buy up newspapers and major media organisations, press freedom would likely be seriously undermined,” the MPs wrote in a letter to UK Secretary of State for Culture, Media and Sport Lucy Fraser. .

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

Some observers have suggested that this point has already been crossed, albeit in a much grayer area: the London newspaper Evening Standard is owned by Russian-British businessman Yevgeny Lebedev, whose father was a member of the KGB. Former Prime Minister Boris Johnson gave Lebedev a seat in the British House of Lords, despite protests and concerns from senior government officials about the Lebedev family's ties to Russia.

Alexander Lebedev, Yevgeny's father, was subject to Canadian sanctions in 2022, accused of “directly enabling” Russia's war in Ukraine. For his part, Yevgeny Lebedev strongly denied assertions that he represented a “security risk,” writing in a March 2022 article: “I am not an agent of Russia.”

In response to the UK legal amendments, RedBird IMI said it was extremely disappointed and was evaluating its next steps, Reuters reported on Wednesday.

Rival bids for The Telegraph include Rupert Murdoch's News UK, and Paul Marshall, the hedge fund billionaire and co-owner of GB News – both seen as having clear right-wing leanings.

RedBird IMI, a joint venture between US 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 CEO Jeff Zucker.

The joint venture's backers have provided Zucker with a $1 billion war chest in the hope that the longtime media executive can chase lucrative investments in the worlds of news, entertainment and sports. Abu Dhabi's IMI pledged 75% of the project, or $750 billion, while RedBird Capital provided the rest.

The Emirati Sheikh Mansour is the ultimate supporter and beneficiary of the fund, with the exception of the shares of RedBird Capital founder Jerry Cardinal, Jeff Zucker and other partners or private shareholders. Sheikh Mansour is Vice President and Deputy Prime Minister, Chairman of the Board of Directors of the state-owned Mubadala Investment Company, which oversees assets worth $276 billion, and owner of the English football club Manchester City.

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

But it has faced investigations and regulatory delays in the UK over its bid for The Telegraph.

For Mazen Hayek, a Dubai-based media consultant and former spokesman for the Saudi-owned MBC media group, the whole controversy is overblown.

“The takeover bid for The Telegraph and The Spectator by RedBird IMI is consistent with the UAE's legitimate soft power and global influence goals. It included a strong commitment to supporting publications' administrative independence and editorial integrity,” Hayek told CNBC.

He cited political investigations, protectionism, double standards and “Islamophobia in business” as reasons behind the UK’s apparent ban on foreign media takeovers.

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

British lawmakers say the Telegraph purchase is more sensitive because of its potential impact on press freedom, given that press freedom and opposition to the government are not allowed in the UAE. The Gulf sheikhdom ranks 145th globally out of 180 countries in freedom of the press, according to Reporters Without Borders.

Conservative MP Alicia Cairns said of the deal in January: “You cannot separate the sheikh from the state.”

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

For Tawfiq Rahim, a senior fellow in the Future Security Program at the Dubai-based New America think tank, the most pressing issue is the disappearance of print newspapers altogether.

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

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