New Zealand Rugby's multi-billion dollar move that could see them leave World Rugby
New Zealand Rugby has engaged in talks with a multi-billion-dollar American investment firm about taking a stake in the struggling sport.
In what could prove a landmark moment in the game’s long and storied history, NZ Rugby have been wooing private-equity giants Silver Lake with the prospect of adding New Zealand rugby to a sports portfolio that includes global cash machine the UFC.
Although they remain some way from a deal, it has been described as a seachange attitude for an organisation steeped in tradition and natural conservatism.
In a reshaped rugby world, the attraction for investors would be the prospect of a club world championship — the principal reason key stakeholders have recently taken to unsubtly referring to Super Rugby franchises as “clubs” — and the broadcasting and commercial revenue that would spin off that.
As rugby lurches forward without clear post-pandemic direction, the Herald understands NZR’s leaders were so concerned about the game’s broken revenue model they held high-level talks with at least two private-equity firms; equity that could potentially give them the leverage to break free from World Rugby’s stranglehold.
One was Luxembourg-based CVC Capital Partners, which already has a significant stake in Northern Hemisphere rugby, but more intriguing are the talks with technology specialists Silver Lake.
The firm has offices in New York, Silicon Valley, London and Hong Kong and manages US$40 billion (NZ$60b) in assets, while its portfolio generates more than $200b revenue annually. It established its reputation as a major player with lucrative investments in internet phone provider Skype and chip maker Broadcom.
More recently, it diversified into the sports and entertainment sector, including global mixed martial arts phenomenon the UFC, Madison Square Garden Company, which owns blue chip NBA franchise the New York Knicks and the NHL’s 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 personal wealth of $1.2b, according to Forbes magazine.
While the potential for significant investment is being extolled among some of NZR’s biggest stakeholders — multiple insiders confirmed NZR had engaged Silver Lake — a source at the national body cautioned against “getting too far ahead”, saying everything was on hold during the coronavirus response and adding they were “miles” from signing a deal.
The source emphasised that any injection of private equity did not equate to the selling of the All Blacks, or even NZ Rugby Incorporated.
“You would set up a subsidiary company of NZ Rugby and get investment into that company in some form of partnership,” the source said. “You put commercial assets into that company — whether that’s in combination with Sanzaar partners and something like Super Rugby in its reincarnated form, or the Rugby Championship.”
Hopes for a rapid reset of rugby’s ecosystem were dealt a blow, however, with the re-election of Bill Beaumont as World Rugby chairman; a move seen as more suited to entrenching the status quo than the promotion of upstart Argentine challenger Agustin Pichot.
It is also a result some insiders believe could set NZR on a separate course from World Rugby, particularly if issues such as revenue sharing are not swiftly addressed.
Despite protestations the All Blacks are not for sale, it would be the height of naivety to suggest any fund investing in New Zealand rugby would not have their eyes on that prize. Despite their on-field primacy looking more tenuous than it has for more than a decade, the All Blacks remain the most valuable brand in the sport — estimated at close to $300m, as opposed to second-most valuable England at around $250m — and the biggest drawcard in the sport.
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“Our financial model at this stage is the All Blacks provide everything — 100 per cent of the profit and we then farm it out to keep the players that then flows throughout the rest of the game,” the source said. “We’re totally dependent on them remaining, as they have been, at the top of the world for 100 years. If that was to change, it would have a substantial impact on NZ Rugby, so we’ve got to get revenue streams and we can’t afford to fund those ourselves.”
The search for alternative revenue streams comes at a time when NZR is working through redundancies that will affect half their workforce after the loss of $7.4m in 2019 was exacerbated by the pandemic.
With broadcast and commercial revenue projected to drop 70 per cent this season, about $120m, those losses are expected to swell to eight-figure losses next year. All Blacks shirt sponsor AIG has also cut ties with the organisation, although there is said to be no shortage of suitors for that sponsorship real estate.
The desire to find funding confirms at the highest levels of the sport there is a concession the competition structures, which aside from the odd tweak have remained in place since rugby turned professional in 1995, are no longer fit for purpose.
“We need a completely brand-new model,” one high-level source said of the situation where the Super Rugby franchises required a bailout and the provincial unions were financial dead weights.
“NZ Rugby making multimillion-dollar losses [that are] covered every 12 years by the Lions … it’s gone, we have to change it completely.
“Certainly at the Super Rugby level, our financial model there is under huge pressure, both the competition and our teams. We’re grossly under-capitalised. That’s a critical area.”
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The source indicated NZR would resume talks in earnest with Silver Lake, and others, once it had a firm blueprint for a reincarnated Super Rugby.
The five franchises — the Blues, Chiefs, Crusaders, Highlanders and Hurricanes — have instigated a review, Aratipu, that is likely to see a short-term contraction of Super Rugby to a domestic or transtasman competition. But any hopes Australia might be involved initially have been dampened.
It is understood Rugby Australia has also been in talks with private equity firms but its financial situation, which has it confronting a $120m revenue deficit, is increasingly imperilled.
Add to that this week’s ugly fallout from Raelene Castle’s resignation as chief executive, which involved Rugby Australia board member Peter Wiggs quitting after an explosive email exchange with interim chair Paul McLean, and RA’s shambolic state only appears to be worsening.
“Can the professional game in the short term survive over there?” asked an NZR source. “Will they actually have enough money to pay for the Reds, Waratahs, Brumbies and Rebels? How are they going to pay the Wallabies?
“Are they going to have to return to Manly versus Randwick club rugby and have their best players playing overseas?
“It’s really difficult to look at Australia with multi-million losses and figure out how they’re going to get out of that hole.
“I think we have to ignore Australia because it’s too much of a variable.”
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— 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 firms, including CVC.
CVC, which owned Formula One from 2006 to 2017 and turned a reported £3.5b profit during that time, was finalising a deal for a 14 per cent stake in the Six Nations and a £120m ($246m) stake in the cross-border European Pro14 as coronavirus started its inexorable spread across the globe.
Those plans have stalled, although there have been recent suggestions the money could still be on the table when rugby returns to television screens.
In 2018, CVC took a 27 per cent holding in English club rugby’s Premiership.
The Luxembourg-based outfit is also in talks to take a stake in Italy’s premier football league, Serie A.
It is, however, worth noting CVC’s ruthless pursuit of profits caused much unrest within F1, with then deputy team principal of Force India Bob Fernley accusing it of “raping the sport”.
Silver Lake did not respond to Herald inquiries about the possible moves by NZ Rugby.
Comments on RugbyPass
🤦♂️🤣 who cares who’s the best . All I know is the All Blacks have the star coach but have few star players now …
27 Go to commentsJe suis sûr que Farrell est impatient de jouer avec Lopez et Machenaud et d’être entraîné par Collazo… 🤭
1 Go to commentsAn on field red (aka a full red) in SRP must surely carry a bigger suspension than a red card given by the bunker as that carries a 20 minute team punishment. Had Damon Murphy abdicated his responsibility as a ref and issued both Drua players a yellow, which would have been upgraded to a 20 minute red by the bunker, that would have killed Australia and New Zealand’s push for the 20 minute red to be trialled globally from July this year.
11 Go to commentsEver so often you all post a Danny Care story that isn’t the announcement that he has finally re-signed for one more, victory tour season at Quins and I’m just like, “well you fooled me again!” My absolute favorite player ever, we need to make his final year at the Stoop (and Twickers) official already. I know he supposedly snubbed France but I won’t feel better until he signs.
1 Go to commentslate hit what late hit it wasn’t at all late and can clearly see he was committed before the tackle
1 Go to commentsChristian Lio -Willies 2 try perfomance was a standout. As was captain Scott Barrett. Up front was where the boys won it.They are a great team and players. Fantastic Crusades , you can keep going.
1 Go to commentsI don't know how the locals feel about that? I guess if you call yourselves the Worcester Wasps that might be appease. But really we need more teams in the Premiership in my view so they are not padding it out as they are at the moment. It might curtail so many players going abroad as well
5 Go to commentsNZ 😭😭😭is certainly rivaling England for best whingers cup!😭😭😭 !!!
27 Go to commentsYup. New Zealand won 3 out of 10 world cups played. SA 4 out of 8 attempts 30 Vs 50 per cent.🤔🤔
27 Go to commentsShould've done this years ago. Change Saturday kick off times to around 11am. Up and off and back home before 3pm, limit travel time too. Allows players to actually do something else with their Saturday that's family oriented or being rugby fans they could ‘watch’ pro rugby. Increases crowds etc. How can anyone that enjoys grassroots and pro rugby have to choose between the two on Saturdays?
9 Go to commentsI bet he inspired those supporters just as much.
1 Go to commentsBen Smith Springboks living rent free in his head 😊😂
67 Go to commentsGood to hear he would like to play the game at the highest level, I hadn’t been to sure how much of a motivator that was before now. Sadly he’s probably chosen the rugby club to go to. Try not to worry about all the input about how you should play rugby Joey and just try to emulate what you do on the league field and have fun. You’ll limit your game too much (well not really because he’s a standard athlete like SBW and he’ll still have enough) if you’re trying to make sure you can recycle the ball back etc. On the other hard, you can totally just try and recycle by looking to offload any and everywhere if you’re going to ground 😋
1 Go to commentsThis just proves that theres always a stat and a metric to use to justify your abilities and your success. Ben did it last week by creating an imaginary competition and now you did the same to counter his argument and espouse a new yardstick for success. Why not just use the current one and lets say the Boks have won 4 world cups making them the most successful world cup team. Outside of the world cup the All Blacks are the most successful team winning countless rugby championships and dominating the rankings with high win percentages. Over the last 4 years statistically the Irish are the best having the highest win rate and also having positive records against every tier 1 side. The most successful Northern team in the game has been England with a world cup title and the most six nations titles in history. The AB’s are the most dominant team in history with the highest win rate and 3 world cups. Lets not try to reinvent the wheel. Just be honest about the actual stats and what each team has been good at doing and that will be enough to define their level of success.
27 Go to commentsHow is 7’s played there? I’m surprised 10 or 11 man rugby hasn’t taken off. 7 just doesn’t fit the 15s dynamics (rules n field etc) but these other versions do.
9 Go to commentsPick Swinton at your peril A liability just like JWH from the Roosters Skelton ??? went missing at RWC
14 Go to commentsLike tennis, who have a ranking system, and I believe rugby too, just measure over each period preceding a world cup event who was the longest number one and that would be it. In tennis the number one player frequently is not the grand slam winner. I love and adore the All Blacks since the days of Ian Kirkpatrick when I was a kid in SA. And still do because they are the masters of running rugby and are gentleman on and off the field - in general. And in my opinion they have been the majority of the time the best rugby team in the world.
27 Go to commentsHaving overseas possessions in 2024 is absurd. These Frenchies should have to give the New Caledonians their freedom.
21 Go to commentsBell injured his foot didn’t he? Bring Tupou in he’ll deliver when it counts. Agree mostly but I would switch in the Reds number 8 Harry Wilson for Swinton and move Rob Valentini to 6 instead. Wilson is a clever player who reads the play, you can’t outmuscle the AB’s and Springboks, if you have any chance it’s by playing clever. Same goes for Paisami, he’s a little guy who doesn’t really trouble the likes of De Allende and Jordie Barrett. I’d rather play Carter Gordon at 12 and put Michael Lynagh’s boy at 10. That way you get a BMT type goalkicker at 10 and a playmaker at 12. Anyways, just my two cents as a Bok supporter.
14 Go to commentsThanks Brett, love your articles which are alway pertinent. It’s a difficult topic trying to have a panel adjudicating consistently penalties for red card issues. Many of the mitigating reasons raised are judged subjectively, hence the different outcomes. How to take away subjective opinions?
11 Go to comments