Telegraph urged to slash jobs and ‘forget’ sale as Abu Dhabi fund applies pressure
Christopher Williams
6 min read
RedBird partner David Castelblanco has asked The Telegraph’s leadership to make cuts to non-editorial jobs - Redbird
The Abu Dhabi fund which holds the fate of The Telegraph in its grip has urged executives to make more than 100 redundancies to deliver stretching profit targets.
RedBird, the US private equity firm which manages the RedBird IMI vehicle blocked from taking control of The Telegraph last year, also told senior figures to “forget” the onward sale of the company.
The comments, made by RedBird partner David Castelblanco in a tense meeting this week about planned investments in growth, came despite pledges to the Government to steer The Telegraph into the hands of new owners.
Mr Castelblanco urged The Telegraph’s leadership, including independent chairman Mike McTighe and chief executive Anna Jones, to make cuts to non-editorial jobs equivalent to around one in 10 staff as soon as possible.
He also called for planned editorial investment to be abandoned, including expansion of the US newsroom.
Although it owns debt secured against The Telegraph, RedBird IMI is not in control of the company and legally barred from making strategic changes such as job cuts and from interfering in editorial decisions.
A series of potential backers of US publishing entrepreneur Dovid Efune have pulled out - Jared Siskin/Patrick Mcmullan
Mr Castelblanco’s intervention is likely to raise concerns that after 20 months of limbo and despite new laws intended to safeguard its independence, The Telegraph is coming under undue pressure from a foreign state.
Sources close to RedBird IMI on Thursday night said the fund had not proposed the redundancy programme or that a particular number of jobs should go. They suggested its “feedback” was about the timing of changes.
An investigation of the Abu Dhabi bid and its threat to press freedom, now overseen by Lisa Nandy, the Culture Secretary, was suspended to allow an auction which concluded in October.
It has not resulted in a transaction. A series of potential backers of Dovid Efune, the US publishing entrepreneur who has been trying to raise more than £500m, have baulked at the price demanded or the high-profile nature of the process.
The suggestion directly from RedBird to “forget the deal” is the clearest sign of failure yet. Mr Castelblanco also suggested the firm could retain long-term ownership.
It risks mounting embarrassment for George Osborne, the former chancellor who works at the takeover advisory Robey Warshaw. He advised RedBird IMI on its own doomed bid and has been at the centre of efforts to recover its outlay.
In recent weeks Robey Warshaw had assured Department of Culture officials that Mr Efune was close to a deal bankrolled by Leon Black, a Wall Street billionaire.
Yet he became the latest to pull out this week, hours after receiving questions from The Telegraph about the regulatory and political scrutiny his links to the paedophile financier Jeffrey Epstein might face.
Wall Street billionaire Leon Black became the latest to withdraw from a potential deal to bankroll the newspaper’s purchase - Patrick T. Fallon/Bloomberg
Mr Osborne has been especially close to the Abu Dhabi side of RedBird IMI, which is controlled by Sultan Al-Jaber, the Emirati politician who also heads the vast state oil and gas company Adnoc. He is said to have testily demanded that a buyer be found ready to pay as much as he did.
RedBird IMI gained sway over the fate of The Telegraph by repaying £600m of Barclay family debts to Lloyds Banking Group, which had been secured against the company and The Spectator magazine.
The move derailed an auction by receivers on behalf of Lloyds and was briefly celebrated by Jeff Zucker, the former CNN chief who leads RedBird IMI, as evidence the fund had been “a little smarter than some of our competitors”.
Instead, RedBird IMI is saddled with a potentially significant loss. Rival bidders in the auction won by Mr Efune valued The Telegraph at more than £100m below his offer. They included the advertising grandee Lord Saatchi and David Montgomery, a veteran newspaper entrepreneur.
In the 20 months since Lloyds sent in receivers the business has been overseen by independent directors who now effectively report to Ms Nandy.
New investments have been suspended to allow RedBird IMI to sell the company on stable finances. However, the profit targets for 2025, originally drawn up by the Barclay family, have now been judged unattainable against the need to invest in digital subscription growth as the decline of print newspapers accelerates.
They envisage underlying earnings of £74m, compared with £60m in 2023, the most recent year for which results have been published.
Lisa Nandy, the Culture Secretary, is facing calls from across the political spectrum to intervene in the sale process to break the deadlock - Oli Scarff/AFP
That performance, on projected revenues of £287m – an increase of 7pc on 2023 – would represent a profit margin of 26pc. That compares with around 15pc for The New York Times, the world’s most commercially successful newspaper.
The Telegraph instead plans to deliver underlying earnings of £51m this year, which prompted Mr Castelblanco’s push for job cuts.
In an email to staff this week, Ms Jones, the chief executive, said: “The board has signed off on our ambitious plans for subscription growth and our investments this year will be underpinned by a customer-led, data-centred approach to everything we do.
“I am looking forward to delivering these plans as we work collaboratively across the business.”
Ms Nandy is facing calls from across the political spectrum to intervene to break the deadlock. They are likely to be intensified by RedBird IMI’s suggestion to “forget” the sale to Mr Efune.
In one scenario, she could restart the investigation of RedBird IMI’s bid, which could quickly lead to an order for the independent directors to sell the company to an acceptable buyer at a market price.
A probe by the Competition and Markets Authority would be asked to judge whether the deal is in breach of new laws against foreign state ownership of newspapers. There has been no dispute that it is.
A spokesman for RedBird IMI said: “The Telegraph’s independent directors and management invited RedBird IMI representatives to attend a management presentation on the business.
“There was a broad discussion but RedBird IMI has no role in running The Telegraph, which is wholly and solely the responsibility of the independent directors.
“Our focus remains on securing a sale that provides certainty for the newspaper and its staff.”
Mr McTighe, the chairman, said: “The independent directors approved management’s budget in December and it is now being implemented. This budget is being communicated to employees this week. The board has since shared the budget with certain stakeholders and Redbird was invited to a briefing yesterday where there was a good discussion. The board and management are excited about the delivery of the budget.”
