The decision by the billionaire Barclay brothers to put the Daily and Sunday Telegraph up for sale could herald the breakup of a vast but faltering business empire that ranges from luxury hotels to budget retail.
Bidders are already circling the newspaper group after the identical twin brothers, who were 85 on Sunday, launched a sale process expected to recoup less than a third of the £665m they paid for it in 2004.
Potential buyers include the publisher of the Daily Mail, foreign media groups and even the world’s richest man – Amazon tycoon Jeff Bezos.
The sale also comes in the context of a wider review of the Barclays’ business interests, which include the loss-making online retailer Shop Direct and the Ritz hotel in London.
Sir David and Sir Frederick Barclay boast a combined wealth of £8bn, putting them 17th on the Sunday Times Rich List, but the financial performance of their sprawling network of businesses has proven patchy of late.
The largest companies in their investment portfolio – Telegraph Media Group; the Spectator magazine; delivery firm Yodel; Shop Direct; the Ritz and the Beaumont hotel – are managed by Sir David’s son Aidan and reported combined losses of £290m on revenues of £2.8bn, in the latest year for which financial records are available.
As losses have mounted, the brothers were reported this month to have put the Ritz up for sale at £800m, more than 10 times the £75m they paid for it in 1995.
Telegraph Media Group is expected to have a price tag of about £200m, according to media industry sources. That would be less than a third of the £665m they paid in 2004, although that purchase included the Spectator, which is not part of the current sale process.
One reason for any fall in the value of the Telegraph group is whether it is still perceived as a “trophy” asset worth more than the sum of its parts, given a decline of profits and sales in recent years.
“It may have been a trophy asset when the Barclays bought it but you would struggle to say that now,” said one City source.
Potential suitors include DMGT, owner of the Mail titles, Mail Online and Metro, which is understood to have previously expressed an interest, although it would likely face regulatory scrutiny.
Sources also pointed to Belgian group Mediahuis, which earlier this year paid €145.6m (£125.2m) to buy Independent News & Media, publisher of the Irish Independent and Sunday Independent. INM is chaired by Murdoch MacLennan, a former chief executive of Telegraph Media Group who is rumoured to have encouraged a bid for his former employer.
Interest is also expected from publishing investment vehicle National World, run by David Montgomery, the former chief executive of the publisher of the Mirror titles. Montgomery advised venture capital firm 3i in a bid to buy the Telegraph in 2004, in a bidding war that ultimately saw the Barclays triumph.
Amazon founder Jeff Bezos, who paid $250m to buy the Washington Post in 2013, was linked to a potential bid for the Telegraph last year. Selling both the Telegraph and the Ritz could raise up to £1bn for the Barclay brothers, who live in a castle on the Channel island of Brecqhou. They have insisted they do so for health reasons, rather than for tax purposes.
Neither business has been a huge money-spinner of late, with profits at Telegraph Media Group down from £14m to £900,000 last year, while the Ritz reported earnings of £7m, a slowdown from £12m. But both are at least profitable, which is more than can be said for some of the larger cornerstones of the Barclay edifice.
Their biggest business by revenue is online retailer Shop Direct, which includes Very and the bones of Littlewoods, the department store chain for which they shelled out £750m in 2002 but which no longer has a bricks and mortar presence.
Liverpool-based Shop Direct racked up revenues of just under £2bn last year, an increase of nearly 2% on the previous year. But accounts released last week showed that it slumped £185.5m into the red, a loss seven times greater than that reported last year, due to £310m in exceptional costs.
The bulk of those relate to a surge in claims from customers who said they were mis-sold payment protection insurance (PPI). The company said it had been forced to set aside cash to cover “customer redress payments for historical shopping insurance sales” and was looking at funding alternatives to cope with the liability. The poor performance for 2018 came a year after the Barclays lost a £1.25bn lawsuit against HM Revenues & Customs, after the supreme court ruled that Littlewoods had not overpaid its taxes.
Parcels and courier business Yodel, built on the foundations of Shop Direct’s delivery network, has fared no better than Shop Direct of late. It suffered a pre-tax loss of £116.4m last year on revenues of £481.5m, as customers deserted a business that struggled to shake off a reputation as one of the UK’s most complained-about companies. Directors insisted it had turned a corner thanks to improve service and IT upgrades.
The Barclays’ recent travails come in the context of a decades-long saga that has made billionaires of the twins, born in humble circumstances in west London to Scottish parents who had six other children. They began making money by converting boarding houses into hotels according to a glowing piece written by a Telegraph writer when the brothers bought the newspaper.
In 1983 they bought shipping and brewing company Ellerman for £45m and later made more than £240m by breaking it up and selling it, using the money to invest in hotels. Other money-spinners included the sale of Handbag.com for £22m and the sale of the Scotsman group of newspapers in 2005 for £160m, having paid £85m 10 years earlier.
Their success brought them high-profile friends including former prime minister Margaret Thatcher, who lived out her final months at the Ritz. The brothers were knighted in 2000 for their services to charity. Now, they are preparing to sell a piece of the British media establishment.
