Today is the deadline for bids for the Daily and Sunday Telegraph. So where do things stand, who is likely to be the eventual winner and what will they be acquiring. Some thoughts below.
- First, a brief history of the bid for the newspapers. In 2023, the Barclay family was forced to put the Telegraph Media Group (which also included the Spectator) up for sale after failing to meet their financial commitments. The group was bought by UAE-backed RedBird IMI for ￡600m. However, after political and regulatory concerns, that bid was blocked by the Conservative government in April 2024 which introduced new legislation to ensure the bid effectively could not pass. RedBird therefore put the assets back on the market to recoup as much money as possible.
- The Spectator has already been bought by Sir Paul Marshall, a hedge fund pioneer and who has backed GB News, for ￡100m. That was considered the easier of the two assets to sell simply because it was not a national newspaper group and was therefore unlikely to attract regulatory or public interest scrutiny. It also had a well-established brand plus attracted bidders such as News Corporation, which were unlikely to be able to buy the Telegraph newspaper assets because of regulatory concerns.
- Who therefore is likely to be amongst the bidders? Probably best to start off with who will not be there. As mentioned above, News Corporation were never likely in the running for the Telegraph newspapers simply because of the market share issues involved. Daily Mail and General Trust (DMGT) also pulled out of the bidding process earlier this year, even though the Telegraph titles have long been on their radar screen and presumably for much of the same reasons.
- Ex-Conservative Chancellor of the Exchequer Nadhim Zahawi has also been mentioned as a potential bidder but, given his bid is being backed apparently by (again) the UAE, it is hard to imagine that it would not face the same regulatory issues that Ofcom raised in the RedBird bid. That is not to say that he will not bid but that, for RedBird and other parties, it may be considered too much of a risk. Moreover, if one wanted to be cynical and state that the new Labour Government would have an interest in the sale process, while a successful Zahawi bid may have been more palatable than that of Marshall's, it would not be compared with the others.
- That leaves three candidates whose names have been most banded around. The first is Sir Paul Marshall who has been backed by a number of hedge fund peers including Citadel founder Ken Griffin; industry veteran David Montgomery who runs the listed newspaper group National World; and Dovid Efune, a British-born American-based owner of the New York Sun and who led The Algemeiner into a major distributor of news on Israel and the Middle East (see a very brief bio here: https://www.huffpost.com/author/dovid-efune
)
- The BBC published earlier today a piece (https://www.bbc.co.uk/news/articles/czegl8p0p5po
) that suggested that Dovid Efune was the front runner and I think that is probably true. For a start, the article appears well sourced and connected to those directly involved with the sales process. Only Efune and Montgomery gave presentations to senior managements (suggesting Marshall's interest may have waned) and the comments about Montgomery's presentation seemed particularly cutting.
- There are also though other grounds for considering why Efune should also be considered the likely winner. Although Marshall would be able to finance the bid without any major issues, it is clear he has big plans for The Spectator (ex-Cabinet minister Michael Gove has been appointed the new Editor) which may be more than enough for him. As for Montgomery, who heads National World - which is predominately regional news-based although it has plans to expand and be more platform-neutral - his track record suggests he may not have been the preferred bidder for the titles. Efune, even though he owns the right-leading New York Sun, would also be relatively non-controversial politically
- If Efune does win the bidding process, then what would be the details? First, on price. The BBC article suggests a bidding price of ￡550m and I would be minded to treat that as in the right ballpark. Firstly, as I mentioned above, the article seems well sourced. Secondly, its fits in with the financials (the published summary is here: https://telegraphmediagroup.com/2024-06-19/
). The Telegraph made an 2023 adjusted EBITDA of c. ￡60m. This will include other assets mainly The Spectator but the bulk of profits will be the Telegraph. Assuming around ￡50m+ for the Telegraph newspaper assets. the price would be around 10x or just above EBITDA, which seems reasonable given the growth in revenues and profitability.
- What about Efune himself and his attitude to publishing assets? His vision is likely to align quite closely with what The Telegraph has already been doing. It is clear from his vision for the New York Sun that he is positive on the future of the space (https://www.nysun.com/article/letter-from-the-publisher-why-were-bullish-on-american-journalism
). That fits in with a vision of such publishing assets as not so much being declining print businesses but ones that have strong brands that can be expanded outside of traditional national boundaries due to digital. The pioneer of this has been The New York Times, which continues to grow its digital subscriptions as well as revenues and profits (/https://nytco-assets.nytimes.com/2024/08/Q224-Earnings-Release-Final-For-Distribution-rEk0tfV0.pdf
).
- The Telegraph, of course, has been successful in this regards although it does not have the global heft of the NYT (yet). The accounts for 2023 showed that it surpassed the 1m digital subscription mark with revenues up to ￡268n helped by a 18% increase in digital subscription revenues (to ￡68.5m) and a 33% increase in digital advertising revenues (to ￡16.3m), as well as significantly increasing its online traffic and growing its YouTube channel to 5.2m subscribers. Moreover, 40% of its overall readership is international with a total audience of 30 million across Australia, Canada, Europe and the United States.
- It is perhaps the last market which presents the greatest opportunity for the Telegraph newspaper assets and where Efune's presence in the American market will undoubtedly help. Not only is the United States obviously the biggest advertising market and potential single source of audience, it also - crucially - lacks a major centre-right / right wing national upscale publisher. The Wall Street Journal is more business-orientated and News Corp's New York Post is more tabloid. There is no right-wing equivalent of the New York Times, Washington Post, Chicago Tribune or LA Times and this is an obvious gap in the market, especially as Americans' choice of what sources they read is increasingly influenced by their political views. The Telegraph could easily claim this market.
- In conclusion - and famous last words - it seems like Efune's bid is the most likely to succeed at a price that seems reasonable and with an opportunity to grow The Telegraph into a major international publishing group. The future certainly seems bright for the assets.
As usual, this is not investment advice.
