A consortium made up of AltVest Capital, EasyEquities, 27four Investment Managers and RainFin has launched an audacious bid to buy a stake in the commercial rights of the SA Rugby Union (Saru), which includes its crown jewels, the Springboks.
The bid comes as member unions are set to vote on Friday on a proposal from US-private equity firm Ackerley Sports Group (ASG) to buy a 20% stake in Saru’s commercial rights.
The ASG proposal is likely to fail due to insufficient support from the Sharks, the Blue Bulls and the Lions, who are championing an alternative proposal.
In a letter sent to Saru president Mark Alexander and CEO Rian Oberholzer, the consortium expressed its interest in buying up to 40% of the commercial rights, housed in an outfit called Saru Commercial Rights Company (CRC).
The consortium is proposing a “transformative and inclusive partnership model to acquire a significant (estimated 20%-40%) equity stake” in the commercial rights. It has put up $375m (R6.7bn) for the stake.
“This approach aligns external stakeholders with the success of SA Rugby while providing the necessary capital,” said Warren Wheatley, CEO of Altvest Capital on behalf of the consortium. “Despite external investment, Saru will maintain a controlling stake of 60%-80%, ensuring governance, decision-making authority and strategic oversight remain within the organisation,” he said.
The consortium promises to revolutionise the Springbok brand with tokenisation and fan engagement to deliver tangible benefits to stakeholders. It said it would fund the transaction, which would also establish share schemes for players and staff, through listed debt instruments, among other avenues.
“Institutions and fixed-income investors will participate through listed debt instruments facilitated by SA debt arrangers. This channel enhances equity returns, provides stable funding, and diversifies the capital base with long-term investments suited for institutional mandates,” the proposal states.
Brokerage platforms
“We are partnering with SA’s largest JSE brokerage platforms, including EasyEquities, to ensure broad marketing and distribution of class E shares to retail investors. These brokers will play a crucial role in raising public awareness and facilitating widespread participation in the investment opportunity.”
Saru was not immediately available to comment on the consortium’s bid, which looks to rival that of ASG.
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 balance over four years.
However, the capital must be repaid to ASG. ASG will also have the upper hand on the CRC board, which will consist of 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.
Alexander has warned of the sport’s demise in SA if its revenue structure is not overhauled and an equity partner found, telling MPs on Wednesday that an equity partner would introduce a key cog in diversifying the union’s revenue base.
The union had opted for a partner with international expertise because of the dire need for a cash injection to sustain the sport. Saru had reached a local sponsorship ceiling and growth lay offshore where the proposed ASG had expertise.
“We do not have a reserve fund. Even though our income streams increase, so do our expenses,” Alexander said. “If we do not have a cash investment to at least ensure financial sustainability if we are hit with a crisis again [such as Covid-19], we are going to face a serious problem.”
Under an alternative proposal by the dissenting unions to ASG’s offer, no success fees would be paid. The unions have also suggested 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.
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