U.K. Moves to Bar Foreign State Ownership of Newspapers, a Blow to Telegraph Bid

An audacious effort by the American media executive Jeff Zucker and his Emirati backers to acquire London’s Daily Telegraph appeared to be on life support on Wednesday after the British government advanced legislation that would bar foreign state ownership of newspapers and newsmagazines.

The move by Prime Minister Rishi Sunak would torpedo Mr. Zucker’s bid in its current form, which relies heavily on financing from investment partners in the United Arab Emirates. The use of Emirati funds caused an uproar in Westminster over foreign influence in the British media, given the outsize importance of The Telegraph and its sister publication, The Spectator, to Mr. Sunak’s Conservative Party.

Mr. Zucker’s media venture company, RedBird IMI, can now try to salvage its bid for the publications by finding new investors and diluting the Emiratis’ majority stake to a level allowed under the government’s proposed rules. His representatives had no immediate comment on Wednesday.

The attempt by Mr. Zucker, a former president of CNN, to reinvent himself as an unlikely news mogul in Britain shocked many of the country’s leading media players, including Rupert Murdoch, who had considered acquiring The Telegraph for themselves after the paper went up for auction last year.

Prominent Tories, including the broadcaster Andrew Neil and Fraser Nelson, editor of The Spectator, pounced on Mr. Zucker’s reliance on Emirati funds, turning the transaction into a political flashpoint over foreign influence on British institutions and galvanizing opposition from Conservative Party lawmakers.

The deal was already under review by British regulators. On Wednesday, in the House of Lords, Stephen Parkinson, a minister for culture communications and creative industries, promised to bring forward an amendment to legislation that would prevent foreign state ownership of news publications. The law is expected to pass Parliament, where the Tories have a healthy majority.

“We have listened carefully to the arguments made by Parliamentarians in recent weeks, and are taking action to explicitly rule out foreign state ownership, influence or control of newspapers and periodical newsmagazines,” a government spokesman said.

The resistance to the bid was less about Mr. Zucker, who said he would not run day-to-day operations at the newspaper, than his major partner.

RedBird IMI is a joint enterprise between RedBird Capital, an American private equity firm, and International Media Investments, an Abu Dhabi investment fund controlled by Sheikh Mansour bin Zayed al Nahyan, vice president of the United Arab Emirates and a member of the royal family of Abu Dhabi.

Sheikh Mansour has already cut a wide swath in Britain, raising the hackles of some with his ownership of Manchester City, a Premier League soccer club known for its deep pockets and aggressive financial tactics.

Critics cited the U.A.E.’s autocratic government, checkered human rights record, and friendly ties to President Vladimir V. Putin of Russia as reasons to disqualify the bid for the 168-year-old Telegraph, often called The Torygraph for its influence in conservative politics. These liabilities, lawmakers said, outweighed Mr. Zucker’s editorial track record at CNN, as well as the investor group’s pledge to install provisions to safeguard the paper’s independence.

Michael Forsyth, a former Conservative cabinet minister in the House of Lords, said on Wednesday that the bid “is what it is, which is an influence strategy.”

“Money talks and ownership matters,” Mr. Forsyth said, adding that such influence should not extend to investors with ties to a government that “puts journalists in jail, deports critics and closes down any criticism, a country that is bottom of the class in international freedom tables.”

Any hope that the opposition Labour Party might support the transaction evaporated earlier this week when the shadow culture secretary, Thangam Debbonaire, declared that her party would scuttle the deal if it took power after a general election expected later this year. Labour leads the Tories in most polls by about 20 percentage points.

“Labour is unequivocal and unambiguous on this point,” Ms. Debbonaire told Mr. Nelson, the Spectator editor, in an interview. “Ownership by a foreign power is incompatible with press freedom, which is essential in a democracy.”

If Mr. Zucker withdraws his bid for The Telegraph, one potential acquirer is Paul Marshall, a British hedge-fund billionaire. Mr. Marshall bankrolled GB News, an upstart television channel that has emerged as a kind of aspiring Fox News, giving a platform to populist firebrands like Nigel Farage.

This is not the first time that Britain’s clubby media world has shown hostility to outsiders. Mr. Murdoch’s purchase of The Times of London in 1981 was jeered as a hijacking by an upstart Australian. Mr. Murdoch, who also owns The Sun, is expected to pursue ownership of The Spectator, a prestigious weekly magazine.

Mr. Zucker’s odyssey to acquire The Telegraph began last year, when Redbird IMI agreed to retire $1.47 billion in debt owed by the newspaper’s previous owners, the Barclay brothers. The deal had to be approved by British regulators, who agreed to put off the decision until March.

As criticism grew, Mr. Zucker took multiple trips to London to argue his case. Last week, he appeared on a popular British podcast, “The News Agents,” and accused Mr. Neil of opposing the deal only after he pursued, and was turned down for, a chairmanship role at The Telegraph and The Spectator.

“This may come as a shock, but Andrew Neil is quite the hypocrite on this,” Mr. Zucker said on the podcast. Mr. Neil shot back that he never sought a chairmanship position and said that Mr. Zucker’s “memory is playing tricks on him.”

Mr. Zucker has had more luck with a different transaction in Britain. Last month, RedBird IMI struck a $1.45 billion deal to acquire All3Media, a production company that has overseen hits like “The Traitors” and “Fleabag.”

Benjamin Mullin and Stephen Castle contributed reporting