South Africa’s leading rugby unions are set to ruin SA Rugby’s plans to sell a stake in its commercial rights to US-based private equity company Ackerley Sports Group, according to media reports.
A vote – which will decide whether the $75m (around R1.3bn) deal for a 20 per cent stake in the governing body’s commercial rights company is approved – is set to take place at a South African Rugby Union (SARU) meeting on Thursday, October 17.
According to News24, the deal, which looked like it was on course to succeed over the weekend, is now unlikely to go ahead as the country’s top provincial unions have written a letter to SARU president Mark Alexander and CEO Rian Oberholzer in which they requested that Thursday’s meeting be postponed.
The Lions, Blue Bulls, Sharks and Western Province are among the provincial unions who have requested the postponement of the meeting to “prevent a public spectacle which is not in the interests of SARU or its members”.
News24 reports that the letter was sent to union bosses and by Monday evening seven out of SARU’s 14 member unions had signed the letter, opposing the ASG deal.
Request made for an alternative deal
They have requested that an alternative deal be submitted in three months’ time.
If the ASG deal is to proceed, 75% of the unions would have had to vote for the establishment of a commercial entity and the sale of 20% of the new company’s shares to ASG who have no involvement in Africa or rugby.
However, the deal is now on the verge of collapse before it goes to a vote.
SA Rugby officials have been trying to convince its members over the past two weeks to vote in favour of the deal on Thursday, but the concerns raised by the top unions appear to have derailed SA Rugby’s short-term plans in which the ASG deal is accepted without opposition.
In the letter to Alexander and Oberholzer, the unions request for a postponement to Thursday’s vote so that more time is used to consider the validity, mechanics, and overall benefit of the ASG deal.
The letter stated: “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.”
Springboks: ‘Several red flags’ raised as SA Rugby risk losing crucial rights in $75m private equity deal
There is also a suggestion in the letter that should the deal be approved SA Rugby will be at risk of permanent change to their commercialisation and revenue control mechanisms.
“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.
‘Uncertainty will impact on rugby development programmes’
“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.”
The News24 report added that Alexander and Oberholzer were still trying to convince the unions about the benefits of the ASG deal on Monday and that they met with Stormers officials in Cape Town.
The Stormers and Western Province’s vote will be suspended at Thursday’s meeting as the union was placed under administration by SARU after years of governance and leadership issues.
Apart from the Stormers, the three other United Rugby Championship franchises – the Bulls, Sharks and Lions – all have private equity partners.
A venture capital expert Logan Govender couldn’t say if the R1.3 billion valuation of SA Rugby was fair.
“We don’t know whether the valuation is fair or not,” he told News24.
“It does seem low in relation to the New Zealand brand [around R2.4 billion with Silver Lake]. On the face of it the Springbok brand is much stronger, with far greater number of supporters. You can see how Super Rugby has failed after the South African teams have exited.
“A better approach would have been for SARU to appoint an advisor, issue an expression of interest to the entire globe where it obtained non-binding offers on the basis of the valuations of its independent advisor.
“There has been no transparency over the process, and one bidder has been selected. This particularly on a national asset like the Springboks.”
READ MORE: Springboks’ private investment slammed as a ‘dodgy deal’, SA Rugby accused of ‘secrecy’ and receiving ‘massive bonuses’
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