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September 16, 2019updated 30 Sep 2022 8:20am

Independent and Standard ‘vindicated’ by Ofcom report into Saudi investor deals, says owner

By Freddy Mayhew

Evening Standard and Independent owner Evgeny Lebedev has said an Ofcom report into the sale of shares in each title to a Saudi investor had “completely vindicated” their editorial integrity.

In a tweet, Lebedev (pictured) lashed out over what he described as the Government’s “poor judgement and errors” in probing the sale of a 30 per cent stake in each title’s parent company.

He decried it as a “waste of public money, and ours” following a decision on Friday, reported by Press Gazette, that the Government would not appeal a ruling barring it from investigating further after missing a deadline.

The deals concerned are the sale of a 30 per cent stake in Lebedev Holdings, owner of the Evening Standard, to International Media Company through a series of transactions in December 2018 and February.

This followed the sale of a 30 per cent stake in Independent Digital News and Media, which runs the Independent and Indy 100 websites, to Scalable Inc in 2017. Lebedev is the majority shareholder in IDNM.

Saudi national Sultan Abuljadayel holds a 50 per cent stake in the two Cayman Island companies that bought the shares. Investment fund  Wondrous Investment Holdings LP owns the other half.

Then-Culture Secretary Jeremy Wright issued an intervention notice over the deals, which the Government had not been made aware of, and ordered communications regulator Ofcom and watchdog the Competition and Markets Authority to investigate and report back.

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These reports have been published today, with Ofcom taking a stance on public interest concerns regarding freedom of expression and accurate news reporting that might arise as a result of the acquisitions.

Ofcom said public interest considerations only applied to the Standard, as the Independent websites “are not ‘newspapers’ as defined in the relevant legislation”. Neither title is externally regulated.

In its conclusion, Ofcom said it did not consider a fuller “phase two” investigation, which would see a six-month evidence gathering process, was warranted on accuracy or free expression grounds.

Serving Culture Secretary Nicky Morgan said Ofcom’s report “goes a considerable way” in satisfying her concerns, and that based on its conclusions she would not have referred the case to a phase two investigation.

She did however express disappointment that neither Lebedev Holdings or IDNM were willing to take further steps to clarify who is the ultimate beneficial owner of the 30 per cent shares, which Ofcom failed to determine.

In its report, Ofcom said Abuljadayel comes from a “well-known wealthy family in Saudi Arabia” but has no ties to the Saudi royal family and had confirmed that none of the funds used to buy shares in the Standard and Independent came from Saudi royals.

It said Abuljadayel is currently head of the special account unit in wealth management at NCB Capital, having spent 20 years in the financial services, securities and wealth management sectors.

Ofcom said one of the two partners in Wondrous Investment Holdings is Wondrous GP, which is ultimately owned by National Commercial Bank, a Saudi bank the majority of whose shares are held by the state.

The other partner is investment fund the Multi Opportunities Fund No. 75.

Ofcom said it had not explored the precise nature of the links between the investment fund further.

But, it added: “It is possible the investment fund might contain only four investors, all of whom may still be key members of the Saudi government (even if not of the Saudi royal family), or may be companies controlled by the Saudi royal family, and that it is possible that the bank is effectively under the full control of the Saudi state.”

A summary of a business plan provided to Ofcom for the Evening Standard is redacted in the regulator’s report, but it does say that “based on this document, the implied return on investment seems very low”. No documents were provided relating to IDNM, Ofcom said.

Ofcom said “it is not possible to obtain clear evidence in this case that there is no intention to influence”.

It added: “We cannot, of course, rule out any suggestion that the buyers might in future, perhaps with the other shareholders’ consent, seek to present more positive coverage of Saudi matters.

“Nor can we rule out that stronger incentives for the buyers to influence the editorial stance of the publications might arise in the future. However, this is a possibility in relation to other newspapers as well, for example, to any newspaper potentially seeking to expand overseas.”

Both the Independent and Standard have previously said that formal agreements had been made with the investors to protect editorial independence.

Ofcom said both titles were already controlled by an “active proprietor with some editorial views and overseas links” in Lebedev, who is the son of Russian oligarch Alexander Lebedev and has written for the Standard.

Said the regulator: “The risk to accuracy or freedom of expression in newspapers is not in our view significantly greater where a Saudi consortium takes a 30 per cent stake in a newspaper that is 60 per cent controlled by an Anglo Russian, than where that newspaper was 100 per cent controlled by an Anglo Russian.”

It added: “We also consider it important, in light of the challenging market context for newspapers in the UK, that investment in the industry is generally encouraged, as this will help to sustain a plurality of news providers.”

Ofcom said readers of both publications “tend to multi source their news” and were “therefore less likely to be adversely influenced by any change in editorial approach”.

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