CVS deal would bring conflict to rugby and destroy Championship

It is ironic that CVC Capital Partners, the private equity firm hoping to buy a 50 per cent stake in the Premiership for £275m made a £9 billion killing by investing in Formula One for a decade. The irony is because Rugby Union’s only other notable dealing with a Formula One investor was a killing of a different sort. It saw Tom Walkinshaw, in his capacity as Gloucester owner and Premier Rugby chairman, kill the idea of a meritocratic league structure by introducing the cartel-like P share formula to the top league.

It is a funding model Walkinshaw was familiar with from his career in Formula One as owner of the Arrows team after he retired as a touring car driver. It virtually guaranteed the clubs lucky enough to be in the top league in 1997 Premiership membership forever more – as long as they avoided bankruptcy.

This model is based on the premise that if a club with P shares are relegated they receive Premiership-scale funding which dwarfs that of their Championship rivals and virtually assures immediate promotion. That is why London Irish, as one of 13 clubs who own P shares, should bounce straight back to the Premiership. Set against that, any promoted Championship club receive half the funding available to P share clubs, and, with the deck stacked against them, are destined to go straight back down.

It was Walkinshaw’s attempt to create a funding ring-fence, and, although it has been broken by Worcester and Exeter, overcoming the handicap to become Premiership regulars, overall it has had the desired effect for 20 years.

It has not done club rugby in England any favours because it undermines aspiration. Rather than seeing Championship clubs as partners in trying to promote the pro game nationwide – as in the relationship between the Top 14 and ProD2 in France – Premiership owners have seen them as poor relations looking to steal from their table.

It is revealing that this week’s CVC bid makes no mention at all of the Championship, or the club game below the Premiership. If their bid is accepted it will widen the funding gap massively between the top tier and the rest of the English club game, and it also does not take Nostradamus-like powers to see that the RFU will be in an increasingly perilous position when it comes to international player release.

CVC are likely to see it as an opportunity to leverage every last penny out of the governing body for access to international players, because making huge profits are what private equity firms are all about.

Anyone in any doubt about whose interests are paramount here need only look at CVC’s initial bid of £275m. Compared to the £220m paid by the RFU in 2016 for an eight-year deal as part of the Professional Game Agreement it is a very small offer for a half-share of the entire Premiership pie. When you also consider a major part of the RFU deal, which is up for renewal in 2024, was dictated purely by England player release payments to the Premiership, either the RFU got their sums badly wrong, or CVC have.

This leaves me with a deep sense of unease about CVC taking a half share in the Premiership, or as some reports mooted, a controlling share of 51 per cent. The Premiership club owners and chief executives are due to meet on Tuesday to consider the CVC bid, and the good news is that there are differ- ences of opinion already.

With only two of the 13 P share clubs in profit last year the majority of club owners initially appeared to be attracted by the prospect of a £17m windfall to clear a tranche of the debt they have built up. However, while Saracens owner Nigel Wray announced himself in favour of the CVC bid, saying, “They will cherish the game”, Bath owner Bruce Craig and Bristol chairman Chris Booy were much more circumspect. Craig believes that CVC’s bid is much too low, and is not in favour of giving a half shareholding over to private equity, while Booy has warned that the Premiership should be very careful about giving away control of their own affairs.

Those reservations are well-founded, and the RFU would be wise to flag those dangers to Premiership owners whose view of losing control of a flagship league of considerably greater value than CVC have put on it, are being obscured by the short-term gain of clearing debt.

The RFU would be wiser still if they knocked CVC into touch by making a counter offer to Premiership Rugby to create a formal joint venture to run the game in England. This would bring both organisations under one roof with an agreed profit-sharing format. This view, proposed by former England lock Ben Kay in The Times, is a radical solution to a club-country problem which has dogged the game in England since the RFU missed the boat by failing to contract the leading players when the game went professional in 1995.

It would also offer the opportunity to create a coherent structure involving co-operation rather than strife around international and club rugby, including international player release and a meritocratic league structure which gives Championship clubs a place at the table rather than feeding off scraps.

The RFU cannot afford to sit on the sidelines again. Even though they have no control over Premiership ownership rights they have to be pro-active in a situation of this importance.

The governing body face a situation where, if the likes of CVC gain a controlling interest in the Premiership, the game becomes split. This takeover is a recipe for conflict in which international players become a bargaining chip, and private equity starts competing with the RFU for revenue.

“The RFU cannot afford to sit on the sidelines again. They have to be pro-active”