Rugby sale pace horrifies players
Rob Nichol accuses NZ Rugby of working down a ‘pre-determined’ pathway on the Silver Lake investment deal. Hinton reports.
NEW Zealand Rugby Players Association boss Rob Nichol has broken his silence over the Silver Lake private equity standoff, calling for a proper national conversation over the proposed deal and appropriate consideration of an alternate funding model that ticks the same boxes without the associated risk factor.
On Thursday, New Zealand Rugby won unanimous support from its 26 provincial unions in favour of a $387 million deal with the US private equity firm. Under the proposed selldown, Silver Lake would take a 12.5 per cent stake in a newly created NZR entity called Commercial LP, which would oversee NZR’s commercial interests. On the flip side, NZ Rugby would remain 100 per cent liable for the costs of running the game.
However NZ Rugby essentially needs its players’ approval, via their collective agreement, for the deal to proceed and as it stands right now, Nichol’s organisation are worried enough to dig their heels in.
It has created a stalemate situation, with the players believing they now have to air their concerns publicly because of the way the situation is playing out. They firmly reject what they call a ‘‘false narrative’’ that is their desire to drive up their slice of the pie as a key sticking point.
In essence, New Zealand’s rugby players are wondering what all the rush is about to hustle through a deal of this magnitude without giving it the depth of investigation and conversation that should be required for such a game-changing arrangement. Their own slice of the game’s commercial revenue they generate remains fixed at its 36.56 per cent threshold.
‘‘We are talking about the biggest decision in New Zealand rugby history,’’ Nichol told
Sunday News. ‘‘We are opening the door for private ownership of our game. We fought it off in ’95-96, and now we are opening the door. It’s a massive thing to contemplate.’’
And players are concerned by the apparent rush. In fact, Nichol went so far as to accuse NZ Rugby of working down a ‘‘predetermined’’ pathway.
‘‘When it was presented to us late in the piece, and in breach of the obligations owed to us under our collective . . . we got the distinct feeling other options hadn’t been seriously considered, and certainly hadn’t been explored,’’ said Nichol, when asked if NZ Rugby and its provinces had been ‘‘dazzled’’ by the $387m being waved under their noses.
‘‘We felt it’s been a predetermined path from day one. That doesn’t mean it’s the wrong path but it feels like we’re on a set of train tracks going to one destination. We’re saying this is such a big thing, NZ Rugby should take the time to really look at this without rose-tinted glasses, with some clear lenses, share it with others and ask ourselves as a country, is this something we want to do, given the role rugby plays within this country?’’
The crux of the matter, as the players see it, comes down to three key issues.
The first is a question of custodianship of the game versus ownership. ‘‘From the players’ point of view, those that have worn the black jersey . . . it’s a concept they’re only ever custodians of the jersey, and they like to pass it on thinking they’ve added value to it. And the concept of actually selling it means you’re asserting ownership over it.’’
Then there are the financial models in play here which set off some major alarms, based on everything Nichol has seen.
‘‘It’s a situation where they’re looking to sell 12.5 per cent of the
net revenue but retain 100 per cent responsibility for all the costs of running the game. It’s like paying GST twice.
‘‘Our numbers have revealed basically that operationally NZR is break-even at best even if Silver Lake achieve all the growth targets. And if they don’t it’s basically catastrophic on an operating level and how that flows through to the game.’’
Throw in aspects such as Silver Lake’s potential control of the topend of the New Zealand game, the likelihood they will bring in new owners sooner rather than later as they look to realise their investment, potential conflicts of interest within the investment giant’s sphere and the relative lack of risk on their side of the equation, and Nichol believes it’s worthy of a deeper dive.
Lastly, but not least, is the fact that there is a ready-made alternative model that would bring in all the financial capital required with nowhere near the same downside.
The players believe a 5 per cent private capital selldown within New Zealand, which would raise $155m, but would contain little of the downside in the Silver Lake deal, presents as a compelling alternative.
‘‘The players want genuine, thoughtful and insightful conversation around the merits or otherwise of the Silver Lake proposal, viz a vis the alternate option of a private capital raise in New Zealand of 5 per cent of the commercial business, viz a vis maybe the status quo,’’ said Nichol. ‘‘But everyone seems aligned with the fact we need to shore up the balance sheets, and debt is not something that is palatable to NZ Rugby. It does look like we are talking more about the how, not the what.’’
Nichol wonders whether Kiwis grasp the concept of giving up 12.5 per cent of the game’s revenue in perpetuity, and whether the Silver Lake valuation of the business might even be on the low side.
Regardless, he is adamant the players are committed to finding a resolution in this matter. ‘‘We’re going to get an agreement on the collective, and getting an agreement will allow NZR and the provincial unions ultimately to make their decision. It’s going to take some time but we’re going to work hard to get there.’’