NZR slam doors on public offering
New Zealand Rugby (NZR) has rejected an idea from its top players that 5 per cent of the organisation be sold to the public, even though financial projections show it will run at a loss for several years.
The New Zealand Rugby Players’ Association (NZRPA) is opposed to the controversial Silver Lake deal and one of its alternatives involves a 5 per cent public offering.
NZR won approval by unanimous vote from its 26 provincial unions in favour of the $387 million deal with the US investment firm at its annual meeting on Thursday. Silver Lake would take a
12.5 per cent stake in a newly created NZR entity called Commer- cial LP, which oversees NZR’s commercial interests.
The deal still needs sign-off from the players’ association.
Mediation and collective bargaining talks between the two parties have been postponed for several weeks while the players take stock over the situation.
Financial modelling by BDO for the NZRPA, obtained by Stuff, shows the prospect of NZR operating at a loss of nearly $11m across four years if Silver Lake manages to deliver only half of the revenue growth targets.
This modelling has been rejected by NZR.
The NZRPA has said the Silver Lake deal offers ‘‘a very high level of financial risk’’, in a memo sent to union chairs and NZR directors before Thursday’s vote.
‘‘Because NZR is selling revenue and retaining all the costs, NZR’s operating profitability is severely reduced,’’ the memo said. ‘‘[It] could possibly be unprofitable forever after the sale to Silver Lake.’’
The NZRPA offered two alternatives to the Silver Lake deal, suggesting NZR take on $60m in debt, described as a ‘‘prudent amount’’, or sell ‘‘just 5 per cent of New Zealand’s revenue stream to New Zealanders’’.
A 5 per cent offering to New Zealanders would raise $155m, with annual cash returns increasing from 6.8 per cent in 2022 to 11.4 per cent in 2030, modelling showed.
‘‘We think New Zealanders would jump at the chance to invest in our national game,’’ the NZRPA said.
NZR acknowledged in reply there were ‘‘a number of positive aspects’’ to the 5 per cent offering, but said the association’s models were ‘‘flawed’’ and ‘‘unrealistic’’.
‘‘NZR do not believe that private investors in New Zealand have the necessary skills and expertise to assist us with driving our growth ambitions.
‘‘... in the event that there are some investor parties that do have some experience in these areas, we believe that their experience would likely be inferior to that possessed by Silver Lake.’’
NZR chief executive Mark Robinson and chairman Brent Impey said in the letter that Silver Lake was expected to drive 25 per cent plus returns, and local investors would not be able to achieve the same. ‘‘We do not believe a 5 per cent sale is sufficient to provide NZR with the financial stability we are looking for.’’
NZR has also rejected the debt option presented by NZRPA.
The debt model was rejected outright by Impey following Thursday’s annual general meeting.
‘‘We don’t have any assets other than our commercial rights. As a director I couldn’t sign a substantial debt facility because ... I couldn’t warrant it would be repaid,’’ he said.