The top brass of the SA Rugby Union (Saru) has agreed to hand full control of the Springboks’ commercial rights to US private equity firm Ackerley Sports Group (ASG), even though the plan is to sell the entity a stake of just 20% in the yet-to-be-constituted company that will house SA Rugby’s commercial rights.
Business Day has seen a confidential “investment structure and business plan overview” document outlining the finer details of the arrangement. It reveals a deal that is heavily skewed in favour of the private equity firm, with ASG paying just $75m (about R1.3bn) for 20% of Saru’s commercial interests.
Payment of the $75m will be staggered, with the first tranche of $35m set to be paid upon the parties putting pen to paper, and the balance paid over four years.
Under the deal, which will be voted on by Saru unions on Thursday, ASG will get effective control of the new Saru Commercial Rights Company (CRC) and have “perpetual” licence to all of Saru’s commercial rights, including the Springbok brand. And ASG will have a majority on the board of the CRC, despite being a minority shareholder, with the entity also enjoying strong minority protections.
“The Saru CRC board will consist of seven equal voting members (plus certain non-voting members), including three appointed by Saru, three appointed by ASG, plus an independent chair to the board appointed by ASG,” the document reads.
It indicates that ASG’s “investment” in CRC is more like a loan than an outright investment, because ASG will have to be repaid its capital outlay over time, with it retaining its 20% stake, and control over decision-making until it has been repaid, while also playing a “big brother” role on Saru’s board.
“Until ASG capital has been repaid (including preference) they retain full control of CRC decision-making subject to a list of reserved matters. ASG will retain annual approval rights on Saru’s net operating budget and have observer status on the Saru board, influencing spending of invested capital.”
In addition to being repaid its initial outlay, ASG will have a right to sell its 20% stake in CRC after eight years, with one investment expert engaged by Business Day estimating that should the exit valuations remain at the same multiple as the entry valuation after the eight-year period, ASG could cash in $180m.
Deal fees and related costs, including commissions, are estimated at 15% of the deal, or $11m.
ASG’s entry valuation of the SA rights is significantly below the $133m US private equity firm Silver Lake paid for a 6% stake in the All Blacks’ commercial rights in 2022, with New Zealand Rugby retaining full control over the brand and the commercial entity.
One of the disgruntled franchises that spoke to Business Day said the hefty commission is one of several red flags over the proposed deal, alongside the 15 member unions not benefiting until ASG’s capital is repaid.
ASG was formed in 2023 by Christopher and Ted Ackerley of Ackerley Partners, along with London-based partner Timothy Kirkwood. It invests in the sports sector with a focus on leagues, teams, venues, media and technology, and development opportunities.
Saru said no commission would be paid to its executives in terms of the deal. “No commissions/bonuses/incentives/ex-gratia payments of any kind or description will be received by any officials/executives of SA Rugby.”
The entity also referred Business Day to a statement it released on Friday on its engagements with member unions.
The EFF Statement on the Sale of Commercial Rights of the Springboks to USA Private Equity Firm Ackerley Sports Group
— Economic Freedom Fighters (@EFFSouthAfrica) October 14, 2024
-In a deal that will further cement the national rugby team, which is improperly referred to as the Springboks, as a private entity, the move will mean that… pic.twitter.com/huPdbpmgC8
The organisation said that its president, Mark Alexander, CEO Rian Oberholzer and a legal and financial team had engaged with the majority of Saru’s regional unions as part of the consultation phase on the proposed agreement.
“We are excited about the opportunities that this proposed equity transaction presents, as well as the network and expertise our new partners will contribute. Our engagements with SA membership during the roadshow have been productive and meaningful,” Alexander said.
“Together we can build a stronger and more prosperous future for Saru. We remain committed to ensuring the long-term sustainability and stability of our organisation and this equity transaction represents a vital step in that direction.
“Most importantly, SA Rugby will not be selling any assets or the Springboks in any capacity to an equity partner.
“Instead, our commercial rights inclusive of the [intellectual property] will be licensed to a separate entity that will manage and develop a robust commercial programme.”
Update: October 14
The story has been updated with comment by Saru
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