SARU Presents Private Equity Proposal Timelines and Info

SA Rugby Private Equity Proposal – The Facts

TIMELINE:

• 2018: SA Rugby initiates exploratory discussions with several private equity firms
• 2019: The SA Rugby General Council, composed of its member unions, authorizes the Executive Council to formally begin negotiations with CVC
• 2020-2021: The impact of the pandemic stalls conversations as the Springboks do not play a home test in front of fans for two years
• 2022: The conversation resumes in earnest although the due diligence process proceeds at a slow pace.
• 2023: Negotiations with CVC continue slowly. SA Rugby asks CVC to improve their post-Covid offer. During this time, several other potential investors express interest.
• 2023: Discussions are held with multiple potential investors but, by year end, only CVC and newcomer Ackerley Sports Group (ASG) remain serious contenders.
• 2023 (December 8): SA Rugby’s member unions unanimously approve ASG as the preferred bidder following presentations from both entities, which include details on the associated success fees and transaction costs. The members mandate management to present a formal offer to the Council for consideration
• 2024 (March, May and June): Information sessions are held with all members unions, during which all questions are addressed. Additional sessions for smaller groups are planned.
• 2024 (October): Further information sessions are held for members in five separate groups to thoroughly examine the proposal.
• 2024 (17 October): A Special General Meeting is scheduled where members will decide whether to approve the investment.

Friday, 22 December 2023

SA Rugby approves preferred bidder for equity partnership

The General Council of the South African Rugby Union (SARU) has approved a recommendation from its executive committee on Friday to accelerate conversations with an American-based sports group about a potential investment in SARU’s commercial rights.

Negotiations have begun in earnest with the Ackerley Sports Group, which, if successful, would see the Group receive a shareholding of up to 20% in a new company holding all such commercial rights. The remaining 80% of the shares would be retained by SARU.

The Seattle-based Ackerley Sports Group – and its forerunners – have owned all or a part of several professional sports franchises, including Leeds United, the Seattle SuperSonics, the Seattle Storm, the Seattle Seadogs, the Seattle Seawolves, the Coachella Firebirds and the Seattle Kraken over the past 40 years.

The Springboks and all other rugby activities would continue to be managed separately by SARU, without any investor shareholding. SARU’s activities would be funded by fees paid from the new commercial entity for the licence of the commercial rights into that entity.

“We have spoken to or reviewed many potential equity partners over the past year and more, and now have a preferred contender to move towards a deal,” said Rian Oberholzer, CEO of SA Rugby.

“The investment they could bring will allow us to re-purpose rugby and its operations for the digital age in a way that has been beyond our resources up until now.

“But just as important is the international perspective and experience the Group would bring and how they can lead us to expand the Springbok and South African rugby brand beyond our current borders.”

Oberholzer said the wish was to take a formal proposal to the General Council at the start of the second quarter of 2024.

Wednesday, 14 February 2024

SA Rugby Private Equity Status Update

Note to editors: Please find below an FAQ on the process and status of a potential partnership with a private equity company to assist in reporting following recent announcements, leaks, and the attendant speculation.

What is the state of play? SA Rugby has been approached by private equity companies who wish to acquire a shareholding in the sport’s commercial activities.

Why would you do such a deal? A private equity partnership offers not just an immediate financial boost but also crucially provides the expertise, networks, and resources necessary to enhance the commercial value of South African rugby. This collaboration can position SA Rugby, the Springboks and, eventually, other teams for greater global prominence.

Who are you talking to? The preferred bidder is Ackerley Sports Group (ASG), an American company that is an expansion of an investment company established in 2002 by brothers Ted and Christopher Ackerley. Ackerley Partners have owned all or a part of several professional sports franchises in American basketball, ice hockey, soccer, and rugby, and recently partnered with 49ers Enterprises to assume majority control of the Leeds United Football Club.

Why did you choose ASG? They were unanimously chosen by the members of SA Rugby – including the franchise owning unions – at a General Meeting of SA Rugby on 7 December 2023 after ASG, and another bidder, CVC, made presentations to the meeting. ASG’s offer primarily focuses on immediate financial gain and guaranteed income, with lower thresholds for contingency payments, presenting a straightforward proposal for a commercial partnership, which we believe could offer comprehensive advantages to our organization. The ultimate decision will hinge on balancing the immediate financial requirements with the long-term strategic objectives of our rugby organisation.

Is it a done deal? No, our team was mandated to pursue further discussion. The members of SA Rugby have agreed on the primary conditions, however, substantial effort is ongoing behind the scenes to finalise the specifics. Since the finer points are critical, no final approval will be granted until our members have been thoroughly briefed and a mandate secured. This process can only be agreed upon once our 14 members have approved it.

Who has sign off? Only one body – the member unions of SA Rugby, the sport’s shareholders. It cannot happen without their approval.

When will they see the details? Once a proposed final structure for the new company and its relationship with the existing SA Rugby structure has been finalised a series of workshops and information sessions will be undertaken to allow member unions to fully interrogate the deal. That structure is still a work in progress.

Are you selling the Springboks? No. The Springboks and all national teams will retain their existing management and ownership models. As national institutions, the Springboks and SA Rugby are not transferable to private equity. This strategy is about harnessing our commercial rights in partnership with an organisation, creating a separate entity dedicated to elevating our commercial profile.

So how will the Springboks be paid? The new commercial entity will remit an annual fee to cover all current operations of SA Rugby – from paying the Boks to providing funding to the unions.

What are the next steps: Once a proposed post-deal structure is nearing finalisation it will be workshopped with member unions. Until such time as that position has been reached it would be counter-productive to speculate on.

Is there a deadline for approval: While not definitive, it is anticipated that a conclusive proposal will be presented to the members at the Annual General Meeting scheduled for 30 May 2024, for their approval or rejection.

ADDED TODAY (15 October 2024):

How much commission or bonuses will be SA Rugby executives be paid if the deal goes through: No employee, elected official or consultant of SA Rugby will be paid any form of commission, bonus, incentive, finder’s fee or any other form of remuneration on this – or any other – equity deal. A commission of 15% – including the transactional costs incurred by legal, tax and mergers and acquisitions advisers – is payable to third parties for their professional services and as commission.

Friday, 16 February 2024

An Open Letter to South Africa – by Rian Oberholzer, CEO, SA Rugby

As some of you may have read or heard, SA Rugby is engaged in conversations with a private equity company, which wishes to invest in the future commercial growth of our sport.

That conversation is incomplete, and any agreement that may ultimately be reached, requires the approval of the 14 member unions of SA Rugby before it could be signed.

But there has been much speculation, misdirection and misunderstanding of what the purpose and practicalities of such an agreement involve. Let me put the record straight.

If you take only one thing from this letter, let it be this: The Springboks are not being sold – not now and not ever.

If the private equity deal is approved, it will entail a company investing in a minority shareholding in the commercial rights to SA Rugby’s activities in a newly created Commercial Rights Company (CRC). SA Rugby will remain the majority shareholder.

The CRC will not be responsible for the management or selection of any national teams nor for the management of competitions. It will be based in South Africa and have an operational staff transferred from the existing structures, augmented by international expertise and consultants. It will be SA Rugby’s commercial arm, a subsidiary to the mother body.

What it means in short is that SA Rugby’s commercial activities of selling broadcast and sponsorship rights and running events will continue as before, only in partnership with a company with international experience who believe that our revenues are capable of meaningful increase. This is a good thing.

That is the “what” is happening, but just as important in answering the question, “why are we doing it”?

It’s simple: the Springboks are back-to-back world champions, but off the field the financial sustainability of rugby is far from world class.

The sport took extreme measures to survive the COVID pandemic, but we have zero reserves, and a similarly cataclysmic financial disaster would wipe out the sport as we know it in this country.

Similarly, our peers at international level outperform us in the global commercial markets and we have long needed a step change in our business to generate the income to keep the Springboks on top and, among many other things, help our women one day win their World Cup.

We can’t produce that step change alone and from the foot of Africa, so we have actively sought a partnership with an organisation possessing the platforms, networks, and relationships to enhance our commercial value.

We believe we have found potential partners with those attributes who will join us in the CRC, which will be dedicated only to organically elevating our commercial presence.

I hope I have made it clear that this process is not about a quick cash injection; it is about securing the long-term financial sustainability of the sport of rugby in South Africa so that our international teams can compete on a level playing field.

It will provide us with reserves to weather future storms and the capital to invest in strategies to put us on a par with international best practice on and off the field.

We are not selling the Springboks; we are not ceding away any rights; we are building a new company with a minority shareholder to give the Boks (and the rest of rugby) the commercial resources to ensure that the idea of a three-peat is not just a pipe dream.

Together with the right commercial partners we will be Stronger.

Friday, 4 October 2024

SARU Council to decide on private equity investment

The membership of the South African Rugby Union (SARU) will be given the opportunity to determine the sport’s commercial future later this month.

A Special General Council (SGC) meeting of the 14 full member unions has been scheduled for Thursday, 17 October, at which a formal offer is planned to be presented for consideration.

If the proposal receives a 75 percent majority of the voting membership, it will trigger the conclusion of an agreement for a private equity company to invest into a newly established company to hold the commercial rights of SA Rugby.

The game’s rugby affairs – such as the management, coaching, contracting and selection of all national teams as well as competition management – will continue to be the responsibility of SARU.

The private investors will take up a 20 percent stake in an SA Rugby commercial rights company, which will manage and be responsible for the sponsorship, broadcasting, eventing, branding and licensing aspects of the sport.

The SGC will be the culmination of months of intense work behind the scenes since the Ackerley Sports Group (ASG) were chosen as the preferred bidder by SARU’s membership in December 2023.

“We are very pleased to have arrived at this point and believe we will be able to table an offer to our members that makes commercial and business sense,” said Rian Oberholzer, the CEO of SA Rugby.

“This is a watershed moment for rugby in South Africa as we attempt to ‘globalise’ the Springbok brand in the way that our peers in New Zealand have.

“Private investment will bring financial security as well as the capital investment and global experience and networks to enhance how we communicate, how we do things and how we interact with our stakeholders.”

A series of information sessions have already been held with members and Oberholzer said that a series of visits to member unions would be undertaken before 17 October to further explain any areas of uncertainty.

“Private investment has taken place in several of our member unions and is commonplace in global sport,” said Oberholzer.

“Our performances on the field have kept us near or at the front of the pack for several years, but we have been lagging off the field. This is our opportunity to catch up with our peers in that arena as well.”