The parliamentary portfolio committee on sport, arts & culture has summoned the top brass of the SA Rugby Union (Saru) to explain a proposed transaction involving the union selling portion of its commercial rights to US private equity firm Ackerley Sports Group (ASG).
The deal’s structure is expected to be the focal point at the meeting arranged for Friday. The meeting takes place weeks before Saru members convene to vote on the deal, with ASG actively engaging with dissenting unions to rally their support for the proposed arrangement.
The deal will see ASG acquire a 20% stake in the Saru Commercial Rights Company (CRC) for $75m and gain control over Springbok commercial rights.
Portfolio committee chair Joseph McGluwa confirmed that Saru’s leadership was called to provide more details in a virtual meeting.
“A deal of such magnitude should be thoroughly considered as the Springboks should be seen as a national asset. Because of this, we all have an interest in their fate. The deal should be completely transparent and South Africans deserve to be fully informed,” McGluwa said.
Seven unions, including the Sharks, Blue Bulls, Lions and Stormers, poured cold water on the plan. If the opposition holds, Saru will not meet the threshold of 75% needed to seal the deal.
Vote delayed
A special meeting to vote on the deal was put off at the eleventh hour last month at the request of sport, arts & culture minister Gayton McKenzie. In reply to a parliamentary inquiry from an EFF member, he said he was told that the deal was unlikely to get the union support required .
“Saru’s leadership are making a case for entering into the deal with ASG by proposing that, among other things, the Springbok brand will grow internationally through ASG’s stake and involvement,” he said. “Among the major criticisms of the deal is that ASG have, to date, had no involvement in Africa or rugby. I was also advised that it may prove difficult to persuade 75% of the unions to support the transaction.
“I would not like to dictate to Saru that they cannot agree to this deal if there is no better deal being offered; however, there may in fact be different and better options on the table, and I continue to encourage the parties to explore all options before being locked into something that may be regretted later.”
Saru’s broadcast partner SuperSport took umbrage at being kept in the dark on finer details of the proposed deal. According to ASG’s offer, payment of the $75m will be staggered, with the first tranche of $35m set to be paid on the parties putting pen to paper, and the rest over four years.
But the capital must be repaid to ASG, though it will have perpetual rights to the 20% stake in CRC. ASG will have the upper hand on the CRC board, consisting of seven equal voting members (plus certain nonvoting members), including three appointed by Saru, three by ASG, and an independent board chair appointed by ASG.
Valuation
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. New Zealand Rugby kept full control of the brand and commercial entity.
Hefty success fees are to be paid with former Formula One boss Eddie Jordan’s company to pocket about $7.5m for brokering the Saru-ASG deal.
McKenzie told the EFF that commissions bandied about were worrisome. “Indeed, the question you raise about the large commission is one we share. However, unless there is something illegal or patently unethical about the way the deal has been structured, it would not be advisable to interfere. He said he asked for transparency.
“The Springboks are a national treasure and are owned by all South Africans, regardless of what the paperwork might say,” he said.
With the dissenting union’s alternative proposal there would be no success fees due, and control of the rights would not be ceded to outside parties.
“If equity contribution is required to implement an alternative funding solution, Saru should approach its members first. Short-term funding solutions can be considered to guarantee Saru’s liquidity throughout the process,” the unions said in their letter to Saru last month.
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