By Andrew MacAskill and William James
LONDON (Reuters) - Britain's government outlined plans on Wednesday to stop foreign states from owning newspapers, potentially giving ministers the power to block Abu Dhabi-backed RedBird IMI (LON:IMI)'s bid to buy the Telegraph.
The battle over one of Britain's most famous newspapers has raised questions about the independence of the media and the role of foreign investors acquiring ownership of politically influential assets.
The Telegraph has close connections with Britain's governing Conservative Party and the political struggle for ownership of the 168-year-old newspaper is as much about power and influence as it is about money.
Stephen Parkinson, the culture minister in the House of Lords, said the government would make changes through an amendment to legislation going through parliament to prevent foreign states from having ownership of British newspapers.
"We will amend the media merger regime explicitly to rule out newspaper and periodical news magazine mergers involving ownership, influence or control by foreign states," Parkinson told the Lords.
The proposed changes to the law would in effect block the Telegraph takeover bid by RedBird IMI as currently structured, one government official said. The group also planned to buy the Spectator news magazine.
RedBird IMI, run by former CNN boss Jeff Zucker and with the majority of its funding from Abu Dhabi, said it was extremely disappointed and would now evaluate its next steps.
The deal is already under a separate investigation based on existing laws, but the new plan is more explicitly targeted at preventing foreign state control.
The right-leaning Daily Telegraph is nicknamed the "Torygraph" for its longstanding support for the Conservative - or Tory - Party. Former Conservative prime ministers such as Winston Churchill and Boris Johnson have written for it.
The contest for ownership of the Telegraph is playing out against the backdrop of an unpopular Conservative Party, led by Prime Minister Rishi Sunak, that is set to lose the next election expected later this year, according to polls.
Pressure had been building on the government after Tina Stowell, a former Conservative leader in the Lords, proposed an amendment to the Digital Markets, Competition and Consumer Bill that would give parliament a veto on foreign governments taking over British media organisations.
Her amendment had won the support of more than 100 members of parliament who cited concerns including the possibility of editorial interference and censorship.
Having forced the government to come up with their own plan, Stowell withdrew her amendment.
The new ban on foreign control is expected to be put to a vote in the House of Lords in the next few weeks. It would have to be passed there and in the lower House of Commons before the new rules would come into force.
Parkinson said the new measures would create a new obligation for the government to refer any relevant media merger to the Competition and Markets Authority (CMA) watchdog.
If the CMA determined that the merger "has resulted, or would result, in foreign state ownership, influence or control over a newspaper enterprise", then the government would be legally required to order the merger be blocked or unwound.