Opposition to SA Rugby’s R1.3 billion equity deal with US investors

SA Rugby’s R1.3 billion private equity deal with the United States-based investment firm Ackerley Sports Group (ASG) is in jeopardy after some of country’s rugby unions and franchises voiced their concerns to the mother body in a letter.

The country's top unions, such as the Lions, Blue Bulls, Sharks and Western Province, have asked Saru president Mark Alexander and CEO Rian Oberholzer to postpone Thursday's General Council meeting where the unions were supposed to vote on the deal.

Seven out of Saru's 14 member unions are opposing the ASG deal.

SA Rugby needs the support of 75% of unions for the ASG deal to be pushed through, which will allow ASG to acquire 20% of the shares in SA Rugby’s new commercial entity.

Last December, SA Rugby announced ASG as their preferred equity partner to the General Council after a protracted search.

If the vote passes, ASG will essentially be in control of the commercial rights of the Springboks - SA Rugby’s biggest cash cow - and will sort further investment in sponsorship in the team going forward.

The Economic Freedom Fighters (EFF) have issued a strongly worded statement, saying they are “appalled by SARU's decision to sell 20% of the commercial rights of the Springboks for R1.3 billion”.

EFF CONDEMNS SALE OF SPRINGBOKS COMMERCIAL RIGHTS TO U.S. FIRM

The EFF is appalled by SARU's decision to sell 20% of the commercial rights of the South African national rugby team to the U.S. private equity firm, Ackerley Sports Group, for R1.3 billion. This deal entrenches… pic.twitter.com/AuT0Qdfsr1

— Economic Freedom Fighters (@EFFSouthAfrica) October 14, 2024

“This deal entrenches rugby as an exclusive, privately controlled sport, with Ackerley receiving a perpetual license to control SARU’s commercial rights and majority representation, despite its limited ownership stake,” the statement read.

Back in February, SA Rugby clarified they were not selling the Springboks. Instead, they wanted to position South African Rugby for “greater global prominence“.

“A private equity partnership offers not just an immediate financial boost but also crucially provides the expertise, networks, and resources necessary to enhance the commercial value of South African rugby,” SA Rugby said in a statement.

“This collaboration can position SA Rugby, the Springboks and, eventually, other teams for greater global prominence.”

Alexander and SA Rugby have since visited the unions to explain the deal. However, it seems like not everyone is convinced.

IOL Sport has seen the letter undersigned by seven of the 14 unions, as well as the shareholders of some of the United Rugby Championship franchises, that was sent to Alexander and Oberholzer on Monday.

In the letter, the unions also say they want the vote on the deal to be postponed to “prevent a public spectacle which is not in the interests of Saru or its members".

“This letter is written with the utmost dedication to the interests and future of South African rugby.

“We, the undersigned member unions and their commercial affiliates, are deeply concerned about the proposed transaction, which is due to be voted on at a SARU Special General Council meeting to be held on 17 October 2024,” the letter reads.

“Based on the available information received to date and the last-minute roadshows only a few days before the General Council, we are not supportive of this proposal. Our objections relate to both the substance of the transaction, as well as the process followed to date.

“Investor transparency: The identities of ASG's consortium members and the sources of their funding remain unclear, raising questions about the financial capacity of ASG to implement the transaction fully and who would be the ultimate partners in the deal.

“While we understand and support the need for SARU to explore opportunities for international brand growth, the purported contribution and involvement of ASG in these efforts remains unclear. Equally unclear is the involvement of a private equity sponsor to unlock these opportunities, when this should be the remit of commercial management.

"Many of the senior executives of the undersigned members and their shareholders have significant experience in public and private capital markets and the fee proposed is not appropriate by any measure.

"The fee structure as proposed furthermore raises serious issues of governance and ethics around the transaction, and the independent advice, if any, received by SA Rugby."

The franchises and unions are also concerned about the value of the deal, as well as the commercial impact it may have.

The deal is significantly smaller than the R2.4 billion the All Blacks signed with another US-based investment firm Silver Lakes. Silver Lakes’ stake in the All Blacks is reportedly around 8.58%.

However, according to different reports, the Springboks, while currently all-conquering, are valued around three times less than the New Zealanders in terms of global appeal.

ASG owns stakes in sporting franchises such as English football team Leeds United, NFL outfit San Francisco 49ers and NHL Seattle Kraken.

"The transaction results in a permanent and material change to the commercialisation and control of revenue in South African rugby and, by extension, a treasured national asset in the Springbok brand. It also puts the future of all its members at major financial risk," the letter continued.

"This uncertainty will impact on rugby development programmes which are meant to create the next generation of Springboks. Such an outcome requires a process that is not only fair and transparent but is also seen to be such.

“The process to date has not achieved this.”

@JohnGoliath82