New Zealand Rugby has accepted a $ 465 million ($ A439m) offer from US technology investment giant Silver Lake for a 15 percent stake in commercial rights worth $ 3.1 billion, ($ A2.93b) the Herald can disclose.
The deal, if signed by New Zealand’s provincial Rugby union in the coming months, will be the biggest reach since the game turned professional 25 years ago, and the biggest deal in New Zealand’s sporting history.
New Zealand’s Rugby and Silver Lake have been in talks for more than nine months, with the Herald first expressing their mutual interest last May.
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While Silver Lake’s minority stake is still in negotiations and could range from 10 to 15 percent, with terms not yet finalized, the Herald understands that it has made a $ 465 million bid for 15 percent of the new, separate entity in NZ Rugby.
The deal is subject to acceptance from the majority of provincial unions, with an unexpected decision before the annual NZ Rugby general meeting in April. Provincial unions and Super Rugby bosses scrutinized by the Herald have welcomed the move, but selling shares in national games is expected to provoke a polarizing reaction.
On Wednesday afternoon, NZ Rugby executives embarked on a series of three-hour roadshows to provincial unions, starting in Dunedin, to outline important offers and explain how game-changing funds will be distributed.
The NZ Rugby Players Association, as well as former All Blacks players, coaches and Black Ferns are also being approached as part of the national consultation period.
The NZ Rugby plan involves the creation of a new subsidiary, dubbed CommercialCo, which will be responsible for maximizing commercial rights, including broadcast, sponsorship, merchandising, and growing future revenue streams such as streaming, esports and global training clinics.
The $ 465 million offer from Silver Lake is to buy a 15 percent stake in this entity that has been valued at $ 3.1 billion by a private equity giant with a history of long-term growth investing such as the UFC global mixed martial arts phenomenon Madison Square Garden Company, which owns the NBA blue chip New York Knicks and the New York Rangers franchises of the NHL, as well as the City Football Group, whose flagship team is Manchester City.
Silver Lake has US $ 40 billion (A $ 52 billion) in assets, while its portfolio generates more than $ 200 billion in revenue annually.
NZ Rugby’s commercial rights valuation is better than on a global scale, with the LA Lakers valued at US $ 4.4 billion (A $ 5.8 billion) and Manchester United, the world’s third most valuable football brand, valued at US $ 3.8 billion (A $ 5 billion).
Senior NZ Rugby executives the Herald spoke with emphasized the All Blacks, or other teams, were on sale and described the deal as an “extraordinary offer” that reflects the allure of New Zealand’s 130-year rugby legacy.
NZ Rugby’s promotion to provincial unions details the benefits of cash in at all levels of play, particularly in shoring up under-resourced grassroots, while outlining the need to manage expectations, shape the chest of war and discipline with future spending.
The Herald understands that the Silver Lake investment will be paid out in three tranches over three consecutive years to help ensure it is managed with care.
Fund plans include direct and significant investment into provincial unions; shoring up NZ Rugby cash reserves which took a hit $ 40 million on the All Blacks test cut and last year’s Covid-19 closure, proving the future of community and women’s play through the creation of an inheritance fund, an initiative to tackle a sharp drop in youth participation rates and bear CommercialCo’s costs.
The funds will also help in the ongoing fight to defend players, which the Players Association has a deal that limits 36.5 percent of NZ Rugby’s annual revenue.
NZ Rugby executives believe they have addressed concerns around losing control by ensuring the CommercialCo board will consist of five NZR members, two Silver Lake representatives and an independent chairman.
The profits from future commercial rights will be divided along the proposed 85/15 shareholding lines.
In entering the market, NZ Rugby engaged several private equity firms, including CVC Capital Partners and Bruin Sports Capital, in a competitive bidding process run by investment bank Jefferies.
NZ Rugby executives told the Herald Silver Lake the offer was attractive on a variety of fronts.
Apart from monetary value, Silver Lake’s technology expertise, based in Silicon Valley, access to global networks and a track record of breaking into emerging markets are key attractions in making the most of the All Blacks’ reach.
NZ Rugby executives advised Silver Lake not to adopt a smash-and-grab mentality but, instead, intend to forge a decade-long partnership, despite acknowledging the risks involved when the company wants to exit on time.
The appetite for investing in rugby has peaked in the last year as equity firms dumped shares in a sport they believe are undervalued and underexposed on a global scale.
With CVC Capital Partners buying a stake in the British Premiership Rugby, Pro14 and Six Nations competitions, it is only a matter of time before NZ Rugby makes a similar deal.
In recent years, NZ Rugby has found its financial model, as costs continue to outpace revenue, unstable.
The national body recognizes this model, which relies on All Blacks funding at all levels of play and the 12th annual tour of the British and Irish Lions, the bailout balance must change.
When Covid-19 hit last year, NZ Rugby was forced to cut the pervasive costs of the business, laying off 40 staff to leave its leaner operations.
In comparison to the rest of the world of rugby, New Zealand is now considered to have a relatively stable financial position. It still faces significant losses, but much better than the 70 percent decline in income originally estimated.
If the investment deal goes to plan, Silver Lake’s infusion of capital promises to quickly improve New Zealand’s rugby financial landscape but the trade-off for risk and reward will only become clear in time.
This article first appeared on NZ Herald and reproduced with permission.