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The investor behind an ambitious rugby union expansion is preparing a bid for The Telegraph that would make it the first national news outlet owned by a private equity firm.
CVC, which manages £164bn and has stakes in Premiership Rugby and the Six Nations, is preparing for the first round of bidding this week, City sources said.
The plans are not yet finalised and there is no guarantee that CVC will make a firm offer. However, they are rekindling an interest in The Telegraph that goes back two decades.
At the 2004 auction won by the Barclay family, CVC held discussions to support a bid for The Telegraph by Lord Rothermere, the owner of the Daily Mail.
He withdrew from the current auction last week after deciding that Labour’s election victory meant his bid was unlikely to clear regulatory and political hurdles.
The new CVC bid is independent of Lord Rothermere and is said to be presented as support for the Telegraph’s current leadership in its accelerated transition to digital publishing.
Private equity firms often turn to property sales and staff reductions to boost their returns, but the Barclay family has already exhausted many of those strategies in its quest for cash to prop up its debt-ridden empire.
Takeovers can also add to the debt and interest costs of their targets. Such a strategy by CVC could risk stoking nervousness among Telegraph executives as they navigate the final years of print publishing, which will put pressure on the company’s finances.
Funding its bid, however, would require relatively conservative borrowing relative to the Telegraph’s underlying profits of £60m.
This could also include a chance for the seller, RedBird IMI, to remain invested as a passive minority shareholder.
CVC is likely to seek to pay less than the £510m price paid by the Abu Dhabi-backed fund for The Telegraph last year, but may seek to sweeten the deal with the potential to capitalise on future growth.
An investment in the newspaper publishing business would mark another step towards stardom for CVC after it went public via an IPO in Amsterdam in April.
The previously secretive company, headquartered in Luxembourg and run by a tight-knit group of wealthy partners, has opened its books to raise £1.7bn to fund further expansion of the business.
CVC’s interest in The Telegraph is understood to be driven by the company’s sports, media and entertainment team.
In addition to its interests in rugby competitions, which aim to drive the growth of the sport, the portfolio includes an investment in top-flight Spanish football and ownership of the British video game developer behind RuneScape.
Last year, RedBird IMI attempted to take over the Telegraph through a complex debt deal with the Barclay family. The company put the project back on track after being thwarted by new laws banning foreign state ownership.
Under its plans, The Telegraph would have been managed by US private equity firm RedBird Capital and majority-owned by Sheikh Mansour bin Zayed Al Nahyan, vice president of the United Arab Emirates.
The new auction was launched last month and the deadline for submission of first-round bids was set for Friday. Bids are expected to be selected before a final round of bidding later in the summer.
RedBird IMI paid £600m for a package containing The Telegraph and The Spectator magazine in an ambush that derailed an auction by receivers acting on behalf of Lloyds Banking Group.
The bank had taken control after losing patience with the Barclay family’s outstanding loans, which were fully repaid following the unconventional deal with RedBird IMI.
If the fund is unable to recoup its investment in the auction, it said it could seek to “sell” the company to another vehicle managed by RedBird Capital that would comply with foreign state ownership laws.
It is unclear whether the company’s other funds may have links to sovereign wealth that could fall under the new legislation.
RedBird IMI said interest was “extremely strong”. Lord Saatchi, the advertising executive, has been mooted in recent weeks alongside his partner Lynn Forester de Rothschild. They have not commented.
However, the emergence of CVC strengthens the field of candidates for the takeover of the Telegraph, which seemed to be shrinking.
In addition to DMGT’s withdrawal, there have been rumours that Sir Paul Marshall, the co-owner of GB News, has focused his efforts on The Spectator. His representatives declined to comment.
German publisher Axel Springer, which owns Politico, had expressed interest in last year’s auction, but it was reported last week that it was about to be broken up by its private equity fund KKR.
No private equity firm has acquired a UK national media outlet since the emergence of the buyout industry in the 1980s.
Several players competed in the 2004 auction for The Telegraph newspaper, which was eventually won by the Barclay family. They included Apax Partners, which at the time owned many publishing assets, and 3i, the FTSE 100 private equity firm.
Over the past two decades, newspaper publishers have been hit by a digital revolution in which lucrative print advertising has evaporated and reeling executives have failed to seize emerging online opportunities.
Private equity firms, which aim to sell companies within five years of acquisition, tend to shy away from the news sector as publishers look for viable business models. The growth of digital subscriptions in recent years has revived interest.
CVC declined to comment.
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