Is Silver Lake’s $465m offer too good to turn down for NZ Rugby?
Sometimes if it looks like a duck, waddles like a duck and quacks like a duck, then it flaming well is a duck.
The same might be said of the much-talked-about $465 million offer from US investment company Silver Lake for a purported 15 per cent stake in the commercial arm of New Zealand Rugby.
In case you don’t have a calculator handy, that represents a $3.1 billion evaluation of, essentially, the All Blacks, with a few other offshoots thrown in.
To translate, that is a lot of money for a rugby team. Even one that proclaims to be the biggest brand in the game, like the All Blacks are wont to remind us.
You don’t have to possess the financial acumen of Elon Musk to understand that is one heck of a deal, and one even an organisation as prone to plunging its head into the sand as NZ Rugby must realise is an offer it quite simply cannot refuse.
It does appear to be a nobrainer if the general details made public thus far are anything to go by. You keep waiting for someone to come out with the catch that will reveal this arrangement to be a lot more of a risk than it appears to be thus far.
Of course there is a cost to any business deal like this, and it is one that NZ Rugby has been doing its level best to explain away during its travelling roadshow presentation around the country which recently wrapped up.
As Brian Gaynor noted in his column for BusinessDesk any deal between NZ Rugby and Silver Lake, who own UFC and have significant interests in sporting giants such as Manchester City, the New York Rangers and New York Knicks, would represent a fundamental clash of ideologies.
‘‘NZ Rugby [is a] communitybased sporting organisation,’’ he wrote in his column. ‘‘. . . a bottom-up entity involved in the full range of activities, from children’s sports on Saturday morning to their national teams.
‘‘By contrast, Manchester City, New York Knicks, New York Rangers and UFC are topdown organisations with no commitments to the community. They draft, buy or attract athletes who have been developed by separate community organisations.
‘‘There are absolutely no synergies between a top-down California-based investment group and a community-based NZ sporting organisation. A marriage between the two can only end in disaster, with the strongest financial entity coming out on top.’’
He may be right. But he also may be wrong.
And NZ Rugby chief executive Mark Robinson, a smart operator with a good grasp on modern business practice, appears to be firmly in the camp of the latter.
He is strongly pushing acceptance of the Silver Lake deal as a solution to the dire financial predicament the organisation is finding itself in on the back of the Covid-19 pandemic.
At this point it is worth noting Silver Lake has $104 billion of assets under management, and NZ Rugby has cash reserves of around $93 million, which are set to be severely eroded by an expected loss of around $40m for the current financial year.
And with Covid expected to continue to impact on professional rugby beyond the current term, it is no stretch to say that the financial position of
NZ Rugby is precarious, to say the least.
That hasn’t been helped by an 80 per cent plunge in the value of its 2019 investment in broadcasting partner Sky Television which, on reflection, may not have been the smartest of moves.The Silver Lake deal would essentially recapitalise NZ Rugby, as well as future proof for a potential year or two more of hurt coming.
So, the $465m question is: what is the feeling of the stakeholders in the wake of Robinson’s presentation? Remember, NZ Rugby essentially represents the provincial unions who are going to have to green-light this deal.
Stuff’s understanding is as it stands now, the situation hangs in the balance. There is knowledge of the tremendous commercial upside in play here, with Silver Lake well capable of bringing significant riches to the table courtesy of their wide global reach, but concern around an arrangement some see as akin to dancing with the devil.
Surprisingly, it would appear the Players’ Association is providing the most resistance at present, along with some oldschool types who are wary of widening the gap between the professional and amateur arms of the sport.
I say surprising, because it would appear the players are set to be direct beneficiaries of the sort of cash that is being talked about here. But they are wary.
There are also concerns from provincial unions who wonder just how much of that $465m will trickle down to them, and also from Super Rugby franchises who fear a commercial creep. In other words, could All Blacks be taken even from them when a big-money All Blacks test springs up at a time that clashes with the franchise season?
There is a lot to ponder ahead of a likely vote on the offer at the annual meeting. But the main thing would appear to be this: can NZ Rugby afford to turn down an injection of cash that would essentially save the game? In return for a 15 per cent stake and a couple of seats at a newly created subsidiary board table?
It might just be an offer they cannot refuse.
It is no stretch to say that the financial position of NZ Rugby is precarious, to say the least.