Shocking Twist: The Telegraph snatched away from Barclays – Here’s how!

After news broke on Tuesday that the Barclay family’s securities could be seized by Lloyds Banking Group, there was a sense of shock for some in the Telegraph’s editorial team.

“I haven’t quite woken up to the fact that we no longer report to a Barclay for the first time in 20 years,” said a senior executive.

But there was also a feeling of inevitability after years of talk of a potential sale by the family and long speculations about the huge debts that had been allowed to mount in the holdings of the Telegraph newspapers and The Spectator magazine.

THE move by Lloyds to call receivers and take control of the 168-year-old Telegraph marks the end of an era for a family whose fortunes, amassed by Sir Frederick and the late Sir David Barclay in property, retail and logistics, They have come under scrutiny in recent months following a series of court cases that exposed a bitter dispute within the family and mounting financial pressures.

The twins’ takeover of the paper in 2004 by Conrad Black’s Hollinger after a bitter bidding war marked a major milestone for the Hammersmith-born entrepreneurs, giving them social recognition and influence in the highest Conservative Party offices, which it was in government for much of their tenure.

But the seemingly sudden ouster on Tuesday of Aidan and Howard Barclay, sons of the late Sir David, from the boards of the operating companies that control Telegraph Media Group belies a lengthy process by Lloyds to recover its debts.

The lender eventually ran out of patience on the loans, inherited from the HBOS acquisition in 2008, that had been allowed to grow over the years as interest went unpaid.

The debts, which those close to the trial say are approaching £1bn, have long been written down by Lloyds. “This has been in the works for many months,” said one person involved in the process. “The bank would do nothing suddenly.”

Bank insiders said Lloyds’ previous management was closer to the Barclay family, but the arrival of Charlie Nunn as the lender’s chief executive in 2021 has also brought a new push to clean the bridges of claims. “pre-existing” bad debts.

Talks with the Barclay family in recent years have failed to lead to a debt settlement, according to banking insiders, leading Lloyds to call in receivers at AlixPartners this week to take charge of TMG’s Bermuda parent company as first step to recovering at least some of the outstanding money.

However, Barclays has not given up the fight to regain control of the newspaper. A person familiar with the family’s thinking said one option was to raise funds from other investors, including from the Middle East, to help them buy it out of receivership. The family plans to make further offers, added the person, supervised by Aidan Barclay, who “still thinks he can get the show back on track.”

The family said in a statement that they have continued to speak with the bank. The Bank of Scotland said on Wednesday it was “willing to continue discussions to find a suitable solution”.

But for the Barclay family, according to another person familiar with his whereabouts, the bank has moved at a time of particular distraction, following a series of court cases following the death of Sir David in 2021.

These court cases also provide insight into the complicated offshore structures created to hold the family’s business, as well as more recent pressures on the family’s finances.

The judge acrimoniously £100 million legal dispute between Frederick Barclay and his ex-wife summary the family business last year: “In 2014 the two brothers began to divide what they had to provide for the next generation and with the intention of avoiding tax burdens in life or in the event of death. This has taken the form of a network of highly complex overseas trust arrangements.

The court heard that the brothers “shared an obsession with privacy but also with tax evasion”.

The judge held that this meant Sir Frederick’s share of the property of Brecqhou, a tiny Channel Island off the coast of Sark “where a huge mock castle was built by them at a cost variously quoted to the court as £80 million at £90m and £120m,” was now one of his major identifiable assets.

The family fortune amassed by the twins had been split equally between three of Sir David’s sons and Sir Frederick’s daughter Amanda following the 2014 restructuring. This rejigging of the assets later caused a breakdown in relations between the brothers, ha said the judge.

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

Aidan Barclay testified to the High Court in May as part of the divorce case that as of August 2019 conditions for the family business – which includes online retail group Very and logistics firm Yodel – were not “easy”.

“We’ve had a lot of pressure in the industry over the past couple of years,” he added.

The family has raised some cash in recent years, having sold the Ritz hotel in London in 2020.

The complex network of companies obscures the exact level of debt tied to TMG. People close to the trial said it was difficult to see any sale reach the value of the debt, but that any money would be written back to the British bank’s books. Analysts say the sale of the Telegraph and Spectator could yield between £400m and £700m.

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

“This is not a distressed sale,” one added, noting that the bank was committed to finding the “right buyer” given the political impact and the possibility that competition authorities could take a negative view of any consolidation. of the media.

“The highest bidder may not be the best buyer,” he added. The sale is expected to attract wealthy bidders who could be seen as seeking a means to influence UK politics, analysts said. One person involved in the trial described the likelihood of a “trophy award”.

A prospective UK-based bidder said Middle Eastern investors would likely face political and regulatory scrutiny, adding: “It’s a good franchise, but it’s a single franchise that faces increasing competition. The reported price tag of £600m is delusional.”

Douglas McCabe, an analyst at Enders, said running the newspapers “is not the same as running the widget factory. . . For some owners, influence and relevance are important factors alongside commercial success.”

Another media executive monitoring the bid process said: “Newspapers are rarely sold and normal financial metrics don’t necessarily apply.”

The sale will however be aided by the fact that The Telegraph is a viable business. In the year ending 2 January, Telegraph Media Group reported sales of £245m, up from £235.2m a year earlier, and pre-tax profit of £29.6m, up increase from £22.1 million.

McCabe added that since 2018 the paper has “expressed a sense of quality digital publishing, with smaller story volumes but impressive impact. Its digital subscription model and product development have been well executed.”

Potential bidders essentially fall into two camps.

There are industry buyers like DMGT, the owner of The Mail, who may see the possibility of bringing together two right-wing groups similar to The Times and The Sun under Rupert Murdoch. The Belgian group Mediahuis, which owns other right-wing European newspapers, is another possible bidder. However, German media group Axel Springer is unlikely to bid at the moment, according to people familiar with its plans.

Analysts say former Telegraph executive Will Lewis will likely try to assemble a group of investors for a bid, and they expect former Mirror chief executive David Montgomery, who was beaten by the Barclays in the business in 2004, take another look at how the head of rival media group National World.

Observers and media industry insiders say there is also likely to be interest from wealthy tycoons, from hedge fund boss Paul Marshall to Czech energy tycoon and budding media mogul Daniel Křetínský, and sovereign wealth funds overseas.

If allowed separately, Spectator magazine could be easier to sell: cheaper and without the same barriers to competition.

Murdoch may be interested in acquiring the magazine for both of those reasons, according to analysts, but mostly because of the influence the stock still holds among his right-wing audience. But he faces competition from other tycoons, according to a person familiar with the trial who said: “The Spectator is every billionaire’s wet dream.”

Among Telegraph staff, and after several years of rumors that the media group was going up for sale, the prospect of a new owner was met with at least phlegmatic style.

“Until we become a KGB agent’s ticket to the House of Lords, nobody really cares who buys it,” said a Telegraph staffer. “It may even be a marginal improvement.”

Additional reporting by Jane Croft and Peter Foster