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By Dylan Cleaver and Liam Napier, NZ Herald
New Zealand Rugby has engaged in talks with a multi-million dollar US investment firm about engaging in distressed sport.
In what could be a landmark moment in the game’s long and historic history, NZ Rugby has been courting private equity giants Silver Lake with the prospect of adding New Zealand rugby to a sports portfolio that includes the global ATM. UFC.
Although they are far from an agreement, it has been described as an attitude of radical change for an organization steeped in tradition and natural conservatism.
NZR staff established for layoffs
In a remodeled rugby world, the attraction for investors would be the prospect of a world club championship, the main reason key stakeholders have recently taken the subtle reference to Super Rugby franchises as “clubs”, and the commercial and broadcast revenues that would be generated. that.
As rugby progresses without clear post-pandemic direction, the Herald understands that NZR leaders were so concerned about the game’s broken revenue model that they held high-level discussions with at least two privately held companies; Equity that could potentially give them the leverage to break free from World Rugby dominance.
One was Luxembourg-based CVC Capital Partners, which already has a significant stake in northern hemisphere rugby, but more interesting are the conversations with tech specialists Silver Lake.
The firm has offices in New York, Silicon Valley, London and Hong Kong and manages assets of $ 40 billion (NZ $ 60b), while its portfolio generates more than $ 200b annually. He established his reputation as a major player with lucrative investments in Internet telephony provider Skype and chipmaker Broadcom.
Most recently, he branched out into the sports and entertainment sector, including the global UFC mixed martial arts phenomenon, Madison Square Garden Company, owner of the NBA franchise Blue Chip Knicks and NHL New York Rangers, and City Football Group, whose flagship team is defending English Premier League champions Manchester City.
Silver Lake managing director and managing partner Mike Bingle has estimated a personal wealth of $ 1.2b, according to Forbes magazine.
While the potential for significant investment is being exalted among some of NZR’s main stakeholders, multiple sources confirmed that NZR had hired Silver Lake, a source from the national agency warned of “getting too far ahead,” saying everything was on hold. during the coronavirus response and adding that they were “miles” from signing an agreement.
The source emphasized that any injection of private equity did not amount to the sale of All Blacks, or even NZ Rugby Incorporated.
“It would establish a subsidiary company of NZ Rugby and obtain investments in that company in some form of association,” the source said. “You put commercial assets in that company, either in combination with Sanzaar’s partners and something like Super Rugby in its reincarnated form, or the Rugby Championship.”
However, hopes for a rapid restoration of the rugby ecosystem were dashed with the re-election of Bill Beaumont as President of World Rugby; a move seen as more suited to cementing the status quo than promoting the challenging Argentine challenger Agustín Pichot.
It is also a result that some experts believe could set NZR on a separate World Rugby course, particularly if issues such as revenue sharing are not quickly addressed.
Despite protests that the All Blacks are not for sale, it would be very naive to suggest that any fund that invests in New Zealand rugby does not have its eyes on that award. Even though their lead on the field seems dimmer than it has been for more than a decade, the All Blacks are still the most valuable brand in the sport, estimated to be close to $ 300 million, compared to the second England most valuable at around $ 250 million. and the biggest draw card in sport.
There’s no question that the All Blacks captaincy role awarded to Sam Cane is a well-deserved quote, but @ alexmcleod891 He questions what it means to the rest of his international colleagues. #All blacks https://t.co/uxBi9ePYM4
– RugbyPass (@RugbyPass) May 8, 2020
“Our financial model at this stage is that the All Blacks provide everything – 100 percent of the profits and then cultivate it to keep the players flowing later in the game,” the source said. “We totally depend on them remaining, as they have been, on top of the world for 100 years. If that changed, it would have a substantial impact on NZ Rugby, so we must earn revenue streams and cannot afford to finance them ourselves.”
The search for alternative income streams comes at a time when NZR is working through redundancies that will affect half of its workforce after the pandemic exacerbated the loss of $ 7.4 million in 2019.
With business and business revenue projections to drop 70 percent this season, around $ 120 million, those losses are expected to increase to eight-figure losses next year. The sponsor of the all-black jersey, AIG, has also severed ties with the organization, although it is said that there are no shortage of suitors for that real estate sponsorship.
The desire to find funds confirms that at the highest levels of the sport there is a concession to the competition structures, which in addition to the strange adjustment have remained in place since rugby turned professional in 1995, are no longer suitable for their purpose.
“We need a completely new model,” said a high-level source of the situation in which Super Rugby franchises required a bailout and provincial unions were dead financial weights.
“NZ Rugby making multi-million dollar losses [that are] covered every 12 years by the Lions … it’s gone, we have to completely change it.
“Certainly, at the Super Rugby level, our financial model is under great pressure, both from the competition and our teams. We are very undercapitalized. That is a critical area. “
The source indicated that NZR would resume serious talks with Silver Lake and others once it had a firm plan for a reincarnated Super Rugby.
All five franchises (Blues, Chiefs, Crusaders, Highlanders, and Hurricanes) have promoted a overhaul, Aratipu, which is likely to see a short-term contraction of Super Rugby in a national or transtasman competition. But any hope that Australia might be involved initially has been dimmed.
Rugby Australia is understood to have also been in talks with private equity firms, but its financial situation, facing it with a $ 120 million revenue shortfall, is increasingly in jeopardy.
Add to that the ugly consequences of Raelene Castle’s resignation as this week’s CEO, which involved Rugby Australia board member Peter Wiggs to resign after an explosive email exchange with Acting President Paul McLean, and RA’s chaotic state only seems to get worse.
“Can short-term professional gaming survive there?” asked an NZR source. “Will they really have enough money to pay the Reds, Waratahs, Brumbies and Rebels? How are they going to pay the Wallabies?
“Will they have to go back to the Manly versus Randwick rugby team and have their best players playing abroad?
“It is really difficult to look at Australia with multi-million dollar losses and figure out how they are going to get out of that hole.”
“I think we have to ignore Australia because it is too variable.”
Mike Tyson has spoken about the swirling reports of a possible charity fight against Sonny Bill Williams. Https://t.co/DfQYKYtnVy
– RugbyPass (@RugbyPass) May 8, 2020
The source confirmed that, along with Silver Lake, NZR had been in talks with at least two European-based equity companies, including CVC.
CVC, which owned Formula One from 2006 to 2017 and made a reported £ 3.5b profit during that time, was finalizing a deal for a 14% stake in Six Nations and a £ 120m ($ 246m) stake in The European Pro14 border as a coronavirus began its inexorable spread throughout the world.
Those plans have stalled, although there have been recent suggestions that money may still be on the table when rugby returns to television screens.
In 2018 CVC earned a 27 percent stake in the English rugby club’s Premier League.
The Luxembourg-based team is also in talks to participate in Italy’s main soccer league, Serie A.
However, it’s worth noting that CVC’s ruthless pursuit of benefits caused a lot of unrest in F1, and then-Force India team vice principal Bob Fernley accused him of “violating the sport.”
Silver Lake did not respond to Herald questions about NZ Rugby’s possible moves.
This article first appeared on nzherald.co.nz and was republished with permission.
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