Barclay Brothers Take Control Of Telegraph Titles

The sale of the titles comes six months after the Barclays agreed a secret £260 million deal to buy the global newspaper group headed by troubled media mogul Lord Black. The deal was blocked in Delaware, where the Telegraph Group’s parent company Hollinger is incorporated, by a judge in a move that led to the competitive auction of the Telegraph titles (see US Court Blocks Sale Of Hollinger To Barclay Brothers).

Hollinger International had originally hoped to off-load the whole of its newspaper portfolio, which includes the Chicago Sun-Times and the Jerusalem Post. However, it soon became clear that buyers were focusing solely on the Daily and Sunday Telegraph and the Spectator magazine.

The Barclay brothers and 3i were the only bidders left after Daily Mail & General Trust pulled out saying that it could not afford the very rich price tag attached to the titles. German publisher Axel Springer had to drop out an earlier stage for the same reason, along with Richard Desmond’s Express Newspaper Group (see Desmond Withdraws From Telegraph Race).

The Barclays were favoured as the most likely to take control of the titles due to their ability to find cost cuts through synergy with their existing UK newspapers. Attention will now turn to who will edit the Daily Telegraph.

Commenting on the landmark acquisition of the titles, Aidan Barclay, the son of Sir David, said: “We are delighted to be the new owners and look forward to working with the team to take the business forward.”

Jeremy Deedes, the deputy chairman and chief executive officer of the Telegraph Group, added: “We have ended up not just in safe hands, but with new owners who have a great track record for nurturing, developing and investing in their acquisitions.”

Reports suggest that the Barclay brothers’ winning offer represented a trophy price for the titles, which newspaper executives have said are worth no more than £550 million. However, the deal gives the brothers control of the UK’s highest circulating broadsheet newspaper, which, along with the Sunday Telegraph, accounts for 8% of the national newspaper market.

Legal and regulatory obstacles could still face the Barclays’ in the shape of Lord Black because of his controlling stake in Hollinger and media regulator, Ofcom.

A US court is expected to decide whether the former press tycoon, who is a non-executive director of Hollinger, can use the company’s 72% shareholder vote to block the deal and may do so if the return of $300 million (£166 million) in disputed payments is withheld while the sale goes through.

Due to commercial law in the state of Delaware, shareholders can vote on an asset sale if it represents all or substantially all of the company. The Telegraph Group accounted for 48% of Hollinger turnover and 84% of income in 2002, the last year accounts were available. A Delaware judge is reported to have said this month that a hearing on the shareholder vote was possible.

The Office of Fair Trading is expected to look at the deal because the Telegraph Group has a turnover of greater than £70 million however, referral to the competition commission is unlikely because the change of ownership does not threaten competition in the national newspaper advertising market.