Strain shows in NZ rugby’s tug of war
New Zealand’s rugby players have ramped up their campaign backing an alternative to the $387.5 million offer from American equity giants Silver Lake to buy a 12.5 per cent stake in the Kiwi game, leading the NZR to lash back alleging a breach of trust.
A memo from the New Zealand Rugby Players Association went out yesterday to directors of NZ Rugby and provincial union chairs detailing advice they had commissioned from Forsyth Barr around an alternative capital raising option.
David Kirk, the association president, is chairman of Forsyth Barr.
NZ Rugby chief executive Mark Robinson swiftly attacked the memo as having leaked confidential information without permission, a breach of trust, and a bid to destroy the Silver Lake proposal.
That players-backed alternative would sell 5 per cent of NZR’s revenue-generating assets to the Kiwi public and institutions via a stock exchange-listed entity.
The memo says that ‘‘raising a significant amount of private capital through an NZX-listed Initial Public Offer at a higher valuation than that offered by Silver Lake is a highly achievable option for NZR’’. Anyone can buy NZX shares, overseas investors among them.
The memo brought an immediate reaction from Robinson, who said he was ‘‘shocked and disappointed’’ players’ boss Rob Nichol ‘‘has shared another counter proposal with media before sharing it with New Zealand Rugby’’.
‘‘As such we have not had sufficient time to digest or understand what has been proposed or comment on the detail,’’ he said.
‘‘Further, it includes confidential information about our organisation that we have not consented to being made public or shared with Forsyth Barr or any other professional entity.
‘‘This is a fundamental breach of trust and the partnership which up until now we valued highly.
‘‘NZR has no desire to continue to play out an ill-informed ‘‘my model is better than yours’’ debate and we would have rather continued to constructively negotiate with Rob Nichol and his board which we have made clear.
‘‘Through doing this, the NZRPA leadership has unilaterally taken a decision to attempt to destroy the Silver Lake deal – and the incredible financial and capability outcomes it would provide for all of rugby.
‘‘We are sorry, that for the players, their own union has put them in this position where the greatest opportunity for the future of all of rugby in New Zealand could be lost.’’
The players’ memo to NZ Rugby goes on to say that, based on advice from leading Kiwi financial investment advisors Forsyth Barr, a ‘‘NZ Inc’’ initial public offering (IPO) would produce the following:
A valuation of NZR Commercial Co (NZRCC) of between $3.4 billion-$3.8b, which is between 12-23 per cent higher than Silver Lake’s valuation That selling 5 percent of NZRCC at this valuation would deliver gross proceeds to NZ Rugby of between $171m-$191m. Further, it says Forsyth Barr, based on their institutional knowledge and research, believe there would be ‘‘considerable’’ demand from New Zealand investors for such an offering.
They put the interest numerically at between $450m-$650m, and believed it could be ready to launch by as soon as September this year.
The memo goes on to urge consideration of their alternative proposal (with Forsyth Barr’s accompanying financial breakdown) because they believed it ticked a number of important boxes, including giving New Zealanders a chance to own a slice of NZ Rugby, raising capital at a higher valuation than Silver Lake’s proposal and in an amount commensurate with needs, and ensuring a greater level of profitability while still providing the same distribution to provincial unions and restoring NZR’s reserves to an acceptable level.
The 5 per cent ‘‘NZ Inc’’ model would provide a ‘‘sound balance’’ between growing the commercial enterprise and investing in the game at all levels, would still allow NZR to grow capability and connections without being constrained by Silver Lake’s networks.
Clearly the players are not budging to any discernible measure in their standoff with NZ Rugby over the proposed Silver Lake sale. There remains a chasm between their view and that of the national organisation around the appropriate path forward.
The players want a measured public debate that compares and contrasts the two proposals, and they want NZ Rugby to budge from what appears to be an inflexible view that the Silver Lake offer is effectively the only one on the table.
NZ Rugby, in contrast, believes the Silver Lake deal is a ‘‘no-brainer’’ and are adamant it provides the financial security required to meet all their obligations going forward.
Forsyth Barr’s managing director Neil Paviour-Smith told Stuff he believed NZ Rugby owed it to New Zealanders to at least consider an alternative which he said was ‘‘compelling’’ and ‘‘financially viable’’.