An exclusivity clause entered into between the SA Rugby Union (Saru) and the suitor for its commercial rights, Ackerley Sports Group (ASG) — and especially the commissions that would flow from the proposed deal — will be a sticking point when the private equity firm meets dissenting unions ahead of a vote on the deal in December.
Business Day understands that the dissenting unions, including the Blue Bulls, Sharks and Boland, will stick to their guns in opposition to the proposed deal, and are keen to put forward a counterproposal.
However, an apparent exclusivity clause, the duration of which has not been revealed to them, is frustrating this initiative.
The commissions contained in ASG’s proposal is one of the reasons that the unions are pushing hard against the deal, particularly the proposed fee structure of 10% net of transaction costs — about $7.5m (R131m) — that would be payable to Jordan & Associates, an entity that is controlled by former Formula One team boss Eddie Jordan.
The seven unions have told Saru that any counterproposal they come up with will not pay hefty commissions.
ASG needs to win over several of the dissenting unions to get the deal over the finish line, but one of the union bosses who spoke to Business Day said that ASG’s overtures would come to naught as positions against the mooted deal have hardened.
ASG indicated on Friday that it would meet the seven dissenting unions in a bid to get their buy-in.
The deal would need 75% of the unions to vote in its favour, with the dissenting unions representing about half of the vote.
The deal would see US-based ASG buy a 20% stake in the yet-to-be-constituted company that would house SA Rugby’s commercial rights, Saru Commercial Rights Company (CRC).
According to ASG’s offer, payment of $75m for the 20% stake would be staggered, with the first tranche of $35m set to be paid on the parties putting pen to paper, and the balance over four years.
However, the capital must be repaid to ASG, though it would have perpetual rights to the 20% stake in CRC.
ASG would also have the upper hand on the CRC board, which would comprise seven equal voting members (plus certain non-voting members), including three appointed by Saru, three appointed by ASG and an independent chair to the board appointed by ASG.
Under the unions’ alternative proposal no success fees would be paid. They also suggest that control of the rights should not be ceded to outside parties.
The unions have told Saru that if an equity contribution is required to implement an alternative funding solution, then Saru should approach its members first, and that short-term funding solutions be considered to guarantee Saru’s liquidity throughout the process.
Saru is desperate for a cash injection, with the organisation facing a R140m budget shortfall.
The vote for the ASG deal was initially set to take place a few weeks ago, but it was postponed at the 11th hour after intervention by sports and arts & culture minister Gayton McKenzie.
A new special general meeting is set for early December to decide the fate of the deal.
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