Why selling a slice of the ABs makes sense
More than 10,000 kilometres away, an American investment firm is close to buying a slice of your favourite team. Well-sourced reports suggest NZ Rugby is nearing a deal to sell
15 per cent of the All Blacks’ commercial rights arm to Silver Lake, a US investment giant, after a fiercely fought auction process.
The deal talks, launched last year, have triggered interest from both sides of the Atlantic, with some of Wall Street and the City of London’s biggest buyout firms keen to get in on the action. According to the UK’s
Silver Lake is in ‘‘advanced’’ discussions with New Zealand’s main rugby body.
Silver Lake, backed by institutional investors and large pension funds, isn’t known for doing deals in Aotearoa.
Based in Silicon Valley, the investment giant has orchestrated some of the world’s largest takeover deals, mostly in the technology sector.
In 2013, the firm put together a
US$24.9 billion (NZ$33.8b) leveraged buyout of computer maker Dell, and two years later, combined Dell with rival EMC in a US$67b merger.
The deal for 15 per cent of the All Blacks’ commercial rights is a drop in the ocean compared to that, (and a minority deal, rather than a buyout that would saddle NZ Rugby with debt).
The ABs’ rights have been valued at £1.5b (NZ$2.8b), underlining the growing interest in sports teams and competitions following a frenzy of activity across Europe.
In 2019, Silver Lake snapped up a 10 per cent stake in City Football Group, the holding company behind English Premier League favourites Manchester City.
The American group has also approached billionaire Roman Abramovich about buying a minority stake in rivals Chelsea. Its interest in the ABs proves the national side is in an elite bracket, despite rugby being a less popular international sport.
Why would Silicon Valley dealmakers be interested in New Zealand’s best-loved institution? Across the globe, there’s a race for media content.
As Disney and Netflix consolidate content in movies and television, investors recognise that sport is the best unscripted action you can get. TV stations and streaming services are clamouring for competitions and games. There’s no bigger name in rugby than the All Blacks.
The blueprint for investment success in sport was laid by PE firm CVC Capital Partners, the former owner of Formula 1. CVC’s buyout of F1 is one of the top dealmaking successes of the century, netting the PE firm a US$4.5b profit. Financial investors are on the lookout for their next big win.
For NZ Rugby, the deal offers financial breathing room. A cash injection in the region of £225 million (NZ$430m) for the 15 per cent stake would alleviate financial troubles caused by the Covid-19 crisis, with the return of international competitions, tours, and packed global stadiums seemingly off the cards for the rest of this year.
In a similar deal, CVC recently snapped up 14.5 per cent of the Six Nations tournament’s commercial rights, as European rugby bodies struggle for cash because of the Covid crisis.
What does the investment mean for Kiwis?
The deal should provide more funding for the domestic game, from grassroots levels up. Yet it is also likely to mark a more aggressive push for commercial income.
In Europe, PE firms have quickly pounced to maximise revenue from their sports’ investments. CVC has angered fans with plans to take the Six Nations off free-to-air TV.
How to squeeze more cash from the All Blacks brand in New Zealand is less clear.
New Zealand rugby fans already get a raw deal by international standards, needing to subscribe to pay-TV to watch every ABs match. But with private equity on board, there’s every chance that Sky, Spark Sport, or a new entrant will have to pay more to secure TV rights after 2025.
Like in the UK, costs will probably be passed on to the fans. Silver Lake isn’t a charity investor and will want a decent return on its money. The firm is also likely to want the All Blacks on the field more often, or in new competitions. Those famously expensive replica jerseys might get even more pricey.
Selling a slice of the All Blacks makes commercial sense. NZ Rugby gets a much-needed cash injection while Silver Lake gets lucrative exposure to one of the world’s best-known sports’ teams.
The American dealmakers’ commercial acumen will be valuable in getting the most out of the All Blacks brand. PE firms believe the relatively young professional sport has huge commercial potential, and want more fixtures between northern and southern Hemisphere nations.
The investment trend in rugby is well advanced overseas. Alongside the Six Nations, CVC owns stakes in English Premiership Rugby and Celtic Rugby’s Pro 14. I wouldn’t be surprised to see PE firms hovering around Sanzaar, Super Rugby or the Rugby Championship in the years to come. CVC has a long-standing interest in those competitions.
As deal talks continue, Silver Lake is poised to become the first buyout giant to cash in on New Zealand’s national obsession. But it might not be the last. The rights deal marks the beginning of serious international investment into southern hemisphere rugby.
Whether the trend is a good thing for fans remains to be seen. While a partial sale of commercial rights is unlikely to reshape the game here, future investments in leagues and competitions would present a more radical shift. As those deals have shown, there’s often friction between the parties in it for investment returns, and those emotionally invested for the love of the game.