Shareholders in Lloyds Banking Group could reap a windfall worth more than £500m early next year following a deal that will see it repaid loans in full by the owners of The Daily Telegraph.
Sky News has learnt Britain’s biggest high street lender will be in a position to write back more than £500m on the value of a £700m loan extended years ago to the Barclay family.
One banking analyst said the writeback, the precise size of which will be disclosed in Lloyds’ annual results next February, would pave the way for Lloyds to return a significant amount of capital to investors, potentially through a special dividend or share buyback.
Lloyds is expected to receive a total of £1.16bn early next week from the Barclays following an agreement between the family and RedBird IMI, an Abu Dhabi-based vehicle which is majority-funded by members of the Gulf state’s royal family.
RedBird IMI plans to convert a £600m chunk of the loan into shares in the Telegraph newspapers and The Spectator magazine if it gains regulatory approval for the deal.
On Thursday, Lucy Frazer, the culture secretary, confirmed a Sky News report that she was issuing a Public Interest Intervention Notice (PIIN) that will subject the transaction to scrutiny by Ofcom and the Competition and Markets Authority.
Ms Frazer is seeking the regulators’ responses before the end of January, after which the takeover of the broadsheet newspapers could be approved or blocked.
Image: A newsagent carries a pile of Daily Telegraph newspapers
Dozens of Conservative MPs, including the former party leader Sir Iain Duncan Smith, have called for the deal to face further investigation under national security laws.
The debt repayment to Lloyds is, however, unaffected by the PIIN.
Advertisement
The bank has already given notice to the government of the debt repayment, with the funds expected to be transferred early next week.
The outcome will be a stunning one for Lloyds and its chief executive Charlie Nunn, who had rejected a series of partial repayment offers from the family lodged after the Telegraph’s holding company was placed into receivership during the summer.
In addition to the £700m value of the principal loan, the Barclays are paying more than £400m in interest which has accrued over many years.
“The writeback is pure profit for Lloyds and will flow straight to the bank’s bottom line,” the analyst said.
One person close to the situation said that Lloyds had written down the majority, but not all, of the loan’s original £700m value.
A writeback of over £500m is therefore expected to contribute a meaningful proportion of the bank’s 2023 annual profit.
Analysts say the company is already generating significant sums of excess capital and that the absence of a substantial acquisition would therefore give Lloyds’ board the freedom to return the Telegraph loan windfall to shareholders.
RedBird IMI, which is fronted by the former CNN president Jeff Zucker and funded in large part by Sheikh Mansour bin Zayed Al Nahyan, the owner of Manchester City, has pledged to preserve the Telegraph’s editorial independence.
The repayment of the Lloyds loan will trigger the dissolution of a court hearing in the British Virgin Islands to liquidate a Barclay company tied to the newspaper’s ownership, and temporarily put the family back in control of their shares in the broadsheet title.
However, the Barclays will be subject to restrictions imposed by the government which are expected to be outlined shortly.
A trio of independent directors, led by the Openreach chairman Mike McTighe, will remain in place while a public interest inquiry is carried out.
RedBird IMI’s move to fund the loan redemption has circumvented an auction of the Telegraph titles which has drawn interest from a range of bidders.#
The battle for control of The Daily Telegraph has rapidly turned into a complex commercial and political row which has raised tensions between the DCMS and the Foreign Office over Britain’s receptiveness to foreign investment.
Prospective bidders led by the hedge fund billionaire and GB News shareholder Sir Paul Marshall had been agitating for the launch of a PIIN.
Sky News revealed recently that Ed Richards, the former boss of media regulator Ofcom, is acting as a lobbyist for RedBird IMI through Flint Global, which was co-founded by Sir Simon Fraser, former Foreign Office permanent secretary.
The Telegraph auction, which has also drawn interest from the Daily Mail proprietor Lord Rothermere and National World, a London-listed local newspaper publisher, has now been paused until next month.
The original bid deadline had been shifted from 28 November to 10 December to take account of the possibility that Lloyds might be repaid in full by the Barclay family by December 1.
That bid deadline is now expected to be cancelled.
Until June, the newspapers were chaired by Aidan Barclay – the nephew of Sir Frederick Barclay, the octogenarian who along with his late twin Sir David engineered the takeover of the Telegraph in 2004.
Lloyds had been locked in talks with the Barclays for years about refinancing loans made to them by HBOS prior to that bank’s rescue during the 2008 banking crisis.
A Lloyds spokesman indicated that any capital distributions would be evaluated in the usual way by its board ahead of the bank’s annual results, but declined to comment further.
A backer of Gail’s bakeries is in advanced talks to acquire Flat Iron, one of Britain’s fastest-growing steak restaurant chains.
Sky News has learnt that McWin Capital Partners, which specialises in investments across the “food ecosystem”, has teamed up with TriSpan, another private equity investor, to buy a large stake in Flat Iron.
Restaurant industry sources said McWin would probably take the largest economic interest in Flat Iron if the deal completes.
They added that the two buyers were in exclusive discussions, with a deal possible in approximately a month’s time.
The valuation attached to Flat Iron was unclear on Sunday.
Flat Iron launched in 2012 in London’s Shoreditch and now has roughly 20 sites open.
The chain is solidly profitable, with its latest accounts showing underlying profits of £5.7m in the year to the end of August.
It already has private equity backing in the form of Piper, a leading investor in consumer brands, which injected £10m into the business in 2017.
Flat Iron was founded by Charlie Carroll, who retains an interest in it, but the company is now run by former Byron restaurant boss Tom Byng.
Houlihan Lokey, the investment bank, has been advising Flat Iron on the process.
McWin has reportedly been in talks to take full control of Gail’s while TriSpan’s portfolio has included restaurant operators such as the Vietnamese chain Pho and Rosa’s, a Thai food chain.
The owners of the AA, Britain’s biggest breakdown recovery service, are lining up bankers to steer a path towards a sale or stock market listing next year which could value the company at well over £4bn.
Sky News has learnt that JP Morgan and Rothschild are in pole position to be appointed to conduct a review of the AA’s strategic options following a recovery in its financial and operating performance.
The AA, which has more than 16 million customers, including 3.3 million individual members, is jointly owned by three private equity firms: Towerbrook Capital Partners, Warburg Pincus and Stonepeak.
Insiders said this weekend that any form of corporate transaction involving the AA was not imminent or likely to take place for at least 12 months.
They added that there was no fixed timetable and that a deal might not take place until after 2026.
Nevertheless, the impending appointment of advisers underlines the renewed confidence its shareholders now have in its prospects, with the business having recorded four consecutive years of customer, revenue and earnings growth.
A strategic review of the AA’s options is likely to encompass an outright sale, listing on the public markets or the disposal of a further minority stake.
More from Money
Stonepeak invested £450m into the company in a combination of common and preferred equity, in a transaction which completed in July last year.
That deal was undertaken at an enterprise valuation – comprising the AA’s equity and debt – of approximately £4bn, the shareholders said at the time.
Given the company’s growth and the valuation at which Stonepeak invested, any future transaction would be unlikely to take place with a price of less than £4.5bn, according to bankers.
The AA, which has a large insurance division as well as its roadside recovery operations, remains weighed down by a substantial – albeit declining – debt burden.
Its most recent set of financial results disclosed that it had £1.9bn of net debt, which it is gradually paying down as profitability improves.
AA owners over the years
The company has been through a succession of owners during the last 25 years.
In 1999, it was bought by Centrica, the owner of British Gas, for £1.1bn.
It was then sold five years later to CVC Capital Partners and Permira, two buyout firms, for £1.75bn, and sat under the corporate umbrella Acromas alongside Saga for a decade.
The AA listed on the London Stock Exchange in 2014, but its shares endured a miserable run, being taken private nearly seven years later at little more than 15% of its value on flotation.
Under the ownership of Towerbrook and Warburg Pincus, the company embarked on a long-term transformation plan, recruiting a new leadership team in the form of chairman Rick Haythornthwaite – who also chairs NatWest Group – and chief executive Jakob Pfaudler.
For many years, the AA styled itself as “Britain’s fourth emergency service”, competing with fierce rival the RAC for market share in the breakdown recovery sector.
Founded in 1905 by a quartet of driving enthusiasts, the AA passed 100,000 members in 1934, before reaching the one million mark in 1950.
Last year, it attended 3.5 million breakdowns on Britain’s roads, with 2,700 patrols wearing its uniform.
The company also operates the largest driving school business in the UK under the AA and BSM brands.
In the past, it has explored a sale of its insurance arm, which also has millions of customers, at various points but is not actively doing so now.
By recruiting a third major shareholder last, the AA mirrored a deal struck in 2021 by the RAC.
The RAC’s then owners – CVC Capital Partners and the Singaporean state fund GIC – brought the technology-focused private equity firm, Silver Lake, in as another major investor.
A spokesman for the AA declined to comment on Saturday.
On Friday, after a period of relative calm which has included striking a deal with the UK, he threatened to impose a 50% tariff on the EU after claiming trade talks with Brussels were “going nowhere”.
The US president has repeatedly taken issue with the EU, going as far as to claim it was created to rip the US off.
However, in the face of the latest hostile rhetoric from Mr Trump’s social media account, the European Commission – which oversees trade for the 27-country bloc – has refused to back down.
EU trade chief Maros Sefcovic said: “EU-US trade is unmatched and must be guided by mutual respect, not threats.
“We stand ready to defend our interests.”
Image: Donald Trump speaks to reporters in the Oval Office on Friday
Fellow EU leaders and ministers have also held the line after Mr Trump’s comments.
Polish deputy economy minister Michal Baranowski said the tariffs appeared to be a negotiating ploy, with Dutch deputy prime minister Dick Schoof said tariffs “can go up and down”.
French trade minister Laurent Saint-Martin said the latest threats did nothing to help trade talks.
He stressed “de-escalation” was one of the EU’s main aims but warned: “We are ready to respond.”
Mr Sefcovic spoke with US trade representative Jamieson Greer and commerce secretary Howard Lutnick after Mr Trump’s comments.
Mr Trump has previously backed down on a tit-for-tat trade war with China, which saw tariffs soar above 100%.
Please use Chrome browser for a more accessible video player
3:44
US and China end trade war
Sticking points
Talks between the US and EU have stumbled.
In the past week, Washington sent a list of demands to Brussels – including adopting US food safety standards and removing national digital services taxes, people familiar with the talks told Reuters news agency.
In response, the EU reportedly offered a mutually beneficial deal that could include the bloc potentially buying more liquefied natural gas and soybeans from the US, as well as cooperation on issues such as steel overcapacity, which both sides blame on China.
Stocks tumble as Trump grumbles
Major stock indices tumbled after Mr Trump’s comments, which came as he also threatened to slap US tech giant Apple with a 25% tariff.
The president is adamant that he wants the company’s iPhones to be built in America.
The vast majority of its phones are made in China, and the company has also shifted some production to India.
Shares of Apple ended 3% lower and the dollar sank 1% versus the Japanese yen and the euro rose 0.8% against the dollar.