US group pulls out of deal to buy Daily Telegraph

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US investment group RedBird Capital is pulling out of a deal to buy the Daily and Sunday Telegraph for £500m, the BBC understands.

RedBird had a previous attempt to buy the Telegraph rebuffed by politicians as it was majority-funded by Abu Dhabi's IMI group - which is owned in turn by the Abu Dhabi royal family.

A law change meant that foreign sovereign wealth funds could take a maximum stake of 15% in newspapers or periodicals.

The new bid complied with that rule, but it is understood that the government intended to submit the deal to regulatory review.

RedBird itself has faced questions over the extent of investment it has received from China and Gulf based investors.

The Daily Telegraph has been in limbo for over two years since when the RedBird IMI consortium paid off the debts of the Telegraph's previous owners, the Barclay family, hoping to take eventual ownership of the newspapers.