At the time this edition of Business Day went to print the 14 member unions of the SA Rugby Union (Saru) were set to meet on Thursday to vote on a controversial private equity deal proposal that would cause Seattle-based private equity firm Ackerley Sports Group (ASG) to acquire 20% of Saru’s commercial rights.
There is a good chance the meeting will no longer take place as scheduled since seven of the 14 have signed a letter opposing the deal on the basis of a lack of transparency and asking for a postponement of the meeting until clarity has been provided on a number of issues that have raised red flags.
Since 75% of the Saru-affiliated provincial unions would need to back the plan for it to be adopted, and Western Province Rugby is still under administration due to past boardroom malfeasance and therefore cannot vote, it is likely that Saru will accede to the request.
And so it should. The confidential “investment structure and business plan overview” document outlining the finer details of the arrangement to the unions, which Business Day exposed on Monday, reveals a deal that on the face of it is heavily skewed in favour of the private equity firm, with ASG putting up just $75m (about R1.3bn) for 20% of Saru’s commercial interests.
According to the overview, ASG would not only get effective control of the new Saru Commercial Rights Company (CRC) and have a “perpetual” licence to all Saru’s commercial rights — including the Springbok brand — but would have effective control of the CRC board despite being a minority shareholder. And the $75m would have to be repaid over time, with ASG retaining a free carry of the 20% profit share.
That seems a terrible deal from the SA Rugby perspective even at a superficial level, especially given that ASG’s entry valuation of the SA commercial 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.
Little wonder then that SA business leaders who are involved in SA’s rugby franchises — including Stephen Saad, who chairs the Sharks, and Johann Rupert and Patrice Motsepe, who are controlling shareholders in Blue Bulls and Boland rugby unions — are none too happy that the proposed deal is in the best interests of SA rugby as a whole.
It is hard to argue with the letter the opposing unions sent to Saru objecting to “both the substance of the transaction, as well as the process followed to date”, which pointed out that it appears to be “a highly lucrative deal for ASG and a very costly source of funding for Saru. Raising surplus funds at this cost only to hold ±$40m in a ‘rainy day fund’ raises further questions about the suitability of the proposed deal construct.”
There is no doubting that the Springbok brand — a national asset that has done much to bring the country together in recent years — is undervalued and that as consecutive men’s World Cup winners, SA rugby could benefit from global exposure and the expertise of an outfit of ASG’s ilk. But something about this deal smells, and when something is off the best disinfectant is sunlight.
The Springboks belong to all of us — we should accept nothing less than full transparency from Saru.
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