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Fund backed by Abu Dhabi in line to own The Telegraph within weeks

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RedBird IMI is led by American television news executive Jeff Zucker - PIERRE VERDY/AFP

The Abu Dhabi-backed investment fund RedBird IMI is in line to take control of The Telegraph within weeks in a deal that is causing concern among Conservative MPs.

RedBird IMI would serve as a conduit for a £1.2bn loan, mostly provided by the Emirati royal and Manchester City owner Sheikh Mansour bin Zayed Al Nahyan, which would allow the Barclay family to repay in full a debt to Lloyds Banking Group.

It is understood that almost as soon as that deal is completed, the loan would be converted to shares, making RedBird IMI owner of The Telegraph.

Lloyds seized control of The Telegraph in June by sending in receivers after losing patience with the Barclay family over long standing debts. The family made an offer to repay their owings in full with backing from RedBird IMI last week, threatening to derail an ongoing auction process that has attracted interest from the hedge fund chief Sir Paul Marshall and Daily Mail publisher DMGT, among others.

On Sunday, Lloyds was still assessing the Barclay family offer. However, sources indicated that it was likely to be satisfied that legitimate funds were in place to complete repayment.

That could mean RedBird IMI, which is led by the veteran American television news executive Jeff Zucker, would be in control of The Telegraph as soon as mid-December following a two-week due diligence process where Lloyds is being advised by Lazard.

Nevertheless, the rival investment bank Goldman Sachs is continuing to run the auction process, in which first-round bids are expected by the end of the month.

Sheikh Mansour bin Zayed partly funds investment vehicle RedBird IMI - UAE PRESIDENTIAL COURT/REUTERS

The perception that an influential news publisher would be under the effective control of a foreign power has alarmed some Conservative MPs. Calls for the potential transaction to be scrutinised have increased, with senior ministers under pressure to assess its impact both on the public interest in free expression and on national security.

A letter signed by the senior Tories Sir Edward Leigh, Sir John Hayes and Baroness Margaret Eaton has urged the Deputy Prime Minister Oliver Dowden, the Business Secretary Kemi Badenoch and the Culture Secretary Lucy Frazer to intervene.

The MPs wrote: "Material influence over a quality national newspaper being passed to a foreign ruler at any time should raise concerns, but given the current geopolitical context, such a deal must be investigated."

There was "a strong case for close scrutiny by the government under both the Enterprise Act 2002 and the National Security & Investment Act 2021", they wrote, highlighting questions over the hefty price that RedBird IMI appeared willing to pay. Analysts have valued The Telegraph at about half the value of the loan the Abu-Dhabi-backed fund is preparing to make to the Barclay family.

Potential bidders in the auction of The Telegraph were warned by Lloyds representatives that not more than 25pc cash from the Gulf would be allowed to fund any deal. It is understood that about four fifths of the Barclay family's £1.2bn debt repayment would come from Abu Dhabi.

The National Security & Investment Act 2021 grants ministers sweeping powers to block takeovers and financing transactions that are judged to threaten national security.

RedBird IMI has appointed lobbyists to argue its case, which is likely to emphasise the scale of existing Abu Dhabi investment in the UK. In late 2021 the Government claimed a £10bn foreign direct investment coup in a deal with Mubadala, Abu Dhabi's sovereign wealth fund.

Spokesmen for Lloyds, the Barclay family and RedBird IMI declined to comment.

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