How the Barclays lost The Telegraph

After news broke on Tuesday that the Barclay family’s titles could be taken over by Lloyds Banking Group, some in the Telegraph newsroom were shocked.

“It hasn’t dawned on me that we’re not reporting to Barclay for the first time in 20 years,” said one senior executive.

But there was also a sense of inevitability after years of talk of a possible sale of the family and long speculation about the huge debts piling up at the Telegraph and Spectator holding companies.

Lloyds’ move to hang up and take control of the 168-year-old Telegraph marks the end of an era for a family whose wealth amassed in property, retail and logistics by Sir Frederick and the late Sir David Barclay has been hit by a series of court cases in recent months came under scrutiny, revealing bitter disputes within the family as well as mounting financial pressures.

The twins’ purchase of the paper from Conrad Black’s Hollinger in 2004 after a bitter bidding war crowned the Hammersmith-born entrepreneurs and gave them social acclaim and influence in the highest ranks of the ruling Conservative Party. their tenure.

But the seemingly sudden defense on Tuesday of Aidan and Howard Barclay, the sons of the late Sir David, from the board of companies that run Telegraph Media Group belies Lloyds’ long-term debt recovery process.

The lender eventually ran out of patience with the loans inherited from the 2008 purchase of HBOS, which had grown over the years as interest went unpaid.

The debts, which people close to the process say are close to £1 billion, have long been written off by Lloyds. “This has been many months in the making,” said one person involved in the process. “The bank wouldn’t do anything suddenly.”

According to banking insiders, Lloyds’ previous leadership was closer to the Barclay family, but Charlie Nunn’s move in as chief executive of the lender in 2021 has also brought new impetus to clean up the deck of “legacy” bad debts.

Talks with the Barclay family in recent years have not led to a debt settlement, banking insiders say, so Lloyds this week called in buyers of AlixPartners to take over TMG’s Bermuda-based parent company as a first step. reclaim at least part of the remaining money.

But Barclays did not give up the fight to regain control of the newspaper. A person familiar with the family’s thinking said one option was to raise money from other investors, including from the Middle East, to help them liquidate. The family intends to make further offers, added the person, who oversees Aidan Barclay, who “still thinks he can get the show back on track”.

The family said in a statement that they are still talking to the bank. The Bank of Scotland said on Wednesday it was “willing to continue discussions to find an appropriate solution”.

But for the Barclays, according to another person with knowledge of the situation, the bank’s move comes at a particularly distracting time after a series of court cases following Sir David’s death in 2021.

These court cases provide insight into the complex offshore structures created to keep the family’s businesses afloat, as well as new pressures on the family’s finances.

In the £100m row between Judge Frederick Barclay and his ex-wife in summary the families’ affairs last year: “In 2014, the two brothers set out to divide their estate to provide for the next generation and with the intention of avoiding life-or-death tax liabilities. This took the form of a highly complex web of overseas trust agreements.”

The court heard that the brothers were “obsessed with privacy, but also with tax evasion”.

The judge found that this meant Sir Frederick’s share of Brecqhou, a tiny Channel Island off the coast of the Sark, “where a huge sham castle was built at a cost of £80-90 million, which the court has variously set up.” £120m’ was now one of his main identifiable assets.

THE family fortune amassed by the twins was split equally between Sir David’s three sons and Sir Frederick’s daughter Amanda following a 2014 restructuring. This realignment of assets later caused the relationship between the brothers to deteriorate, the judge said.

The arrangements – which often involve offshore companies based in Jersey or Bermuda, whose beneficiaries include the younger generation – make it difficult to assess the family’s financial situation. But the court case shows that the family’s business empire has come under pressure in recent years.

Aidan Barclay testified in the High Court in May as part of his divorce case that by August 2019 conditions at the family businesses, including online retail group Very and logistics business Yodel, were “not easy”.

“We’ve been under a lot of pressure in the business over the last few years,” he added.

The family has acquired some cash in recent years, however, in 2020 they sold the Ritz hotel in London.

The complex web of companies obscures the exact level of TMG-related borrowing. People close to the process said it was difficult to see the sales meeting the value of the debt, but all the money would be written back into the British bank’s books. Analysts say the sale of the Telegraph and Spectator could be between £400m and £700m.

According to those involved in the process, the sale of The Telegraph newspapers will not be rushed now. Lazard is advising the bank on its options, although other banks are expected to be appointed to oversee the sale.

“This is not a distressed sale,” one added, pointing out that the bank was committed to finding the “right buyer” given the political implications and the possibility that competition authorities would look down on the media consolidation.

“The highest bidder may not be the best buyer,” he added. Analysts say the sale is expected to attract deep-pocketed bidders who appear to be looking for a way to influence UK politics. One person involved in the process described the likelihood of a “trophy asset premium”.

One potential UK-based bidder said Middle Eastern investors were likely to face political and regulatory scrutiny, adding: “It’s a good franchise, but it’s the only franchise facing increasing competition. The rumored £600m price tag is staggering.

According to Enders analyst Douglas McCabe, managing a newspaper “is not the same as managing a widget factory. . . For some owners, influence and relevance are important factors in addition to commercial success.”

Another media executive who has been monitoring the process for bids said: “It’s rare that newspapers are sold and the usual financial metrics don’t necessarily apply.”

The sale continues to be helped by The Telegraph being a profitable business. In the year ending January 2, Telegraph Media Group reported sales of £245m, up from £235.2m the previous year, and pre-tax profits of £29.6m, up from £22.1m.

McCabe added that since 2018, the paper has demonstrated “a quality digital publication with lower volume of stories but impressive impact. Its digital subscription model and product development have gone well.”

Potential bidders can be roughly divided into two camps.

There are industry buyers such as DMGT, owner of The Mail, which would see an opportunity to bring two right-wing groups together, similar to The Times and The Sun, led by Rupert Murdoch. Another potential bidder is the Belgian Mediahuis group, which also owns other right-wing European papers. However, German media group Axel Springer is unlikely to bid for now, according to people familiar with the plans.

Analysts say Will Lewis, the former Telegraph boss, is likely to try to bring together an investor group for a bid and expects former Mirror chief executive David Montgomery, who was pipped to the business by Barclays in 2004, to take another look. boss of rival media group National World.

Observers and media industry insiders say he is likely to be interested in wealthy tycoons, from hedge fund boss Paul Marshall to Czech energy tycoon and budding media magnate Daniel Křetínský, as well as overseas sovereign wealth funds.

Selling the Spectator magazine, if it can be done separately, can be simpler: cheaper and without the same competitive constraints.

Analysts say Murdoch may be interested in buying the magazine for both reasons, but more importantly the title’s influence with a dedicated right-wing audience. But it faces competition from other tycoons, according to a person close to the process who said: “The Spectator is every billionaire’s wet dream.”

The staff of the Telegraph and the several years of rumors that the media group was going to be sold, at least welcomed the possibility of a new owner in phlegmatic style.

“Until we’re a KGB agent ticket to the House of Lords, nobody cares who buys it,” said one Telegraph insider. “It could even be a marginal improvement.”

Additional reporting by Jane Croft and Peter Foster