CASH INJECTION, BUT WHAT DOES PRO14 DEAL REALLY MEAN?
LAST week it was confirmed that talks between the Guinness PRO14 chiefs and private equity firm CVC had finally reached a conclusion.
The deal sees CVC plough millions into the league in exchange for acquiring a 28 per cent stake in the competition.
However, Celtic Rugby – the organisation made up of the Welsh, Scottish, Irish and Italian Unions responsible for running the league – retains a 72 per cent majority stake.
The Italians are a new addition to the equation and we’ll get onto that in a little bit.
On the face of it, the significant investment into the league seems a mouthwatering positive – and it is.
But there are many levels to this and we’ll explore them here....
WHAT ARE THE FIGURES?
It is understood CVC’s investment is in the region of £120 million.
That money is divided up equally among the stakeholder Unions.
IRFU chief executive Philip Browne has been quoted as saying they will receive ‘around £30 million’ in the deal, which adds up when you consider there are four stakeholders – the Welsh, Irish, Scottish and Italian Unions.
HOW IS THE MONEY PAID?
In November it was reported that the money would come to the WRU in the form of a one-off payment. That no longer appears to be the case.
Browne outlined that the IRFU will receive their payment over three years, however the suggestion in Wales is that it will be paid in five instalments.
Ireland have pocketed an initial cash injection of £5 million and it is thought the WRU have a similar arrangement.
WHAT HAPPENS TO THE MONEY NEXT?
In Wales, the £11.8 million funding for the community game is ringfenced and anything the WRU makes on top of that goes into the Professional Game Board pot.
The PRB, using its distribution model, then dish the money out to the regions based on how each of them are performing against the business plans they submitted.
How much each region gets each year will be based on a serious of criteria including; performances on the pitch, players delivered to Wales, coaching, academy, governance, commercial activity among other things.
This would be in addition the the TV and competition money they receive – around £3 million per region under normal circumstances.
That was how it all worked before the rugby universe came to screeching halt and revenue streams dried up overnight.
IS MY TEAM ABOUT TO START SPLASHING OUT ON BIGNAME SIGNINGS?
Hold your horses.
This would not have been entirely advisable even pre-Covid-19. But, now, quite how much money ends up in the PRB pot is up in the air.
The WRU have a substantial financial black hole to fill.
How they decide to fill it, will determine how much of the money they have left to pass on to the regions via the PRB.
How the regions spend the money that eventually makes its way into their accounts is up to them.
But when the fifth and final instalment of the investment is paid, the idea is that the tournament has to be at least 28% better than it is now.
In the regions’ case, they have to become 5.6 per cent more profitable each year to keep pace with the dilution of funds they receive from the league.
That is why it would be wise for regions to push any funds they receive towards generating new revenue streams and enhancing existing ones.
This money only comes around once and if it is not invested wisely, in five years’ time, the Unions – and in turn regions – will simply get 28% less than they used to.
WHY HAVE THE ITALIANS BEEN GIVEN A SEAT AT THE TABLE?
You would be forgiven for thinking that the timing of this seems strange.
Why make the Italian Rugby Federation a member of Celtic Rugby and, in turn, create another mouth to feed when money is so tight?
But it is thought the Italians’ newfound seat on Celtic Rugby didn’t affect the amount of money other Unions got, it simply increased the size of the overall investment.
Previously, Unions would have been in for a 33 per cent share of a smaller pie.
With the Italians entering the equation, they eventually got 25 per cent of a bigger pot of money.
WHAT IMPACT IS CORONAVIRUS HAVING?
In November, when details began emerging of this proposed deal, there was huge excitement as Unions anticipated a significant amount of money flowing their way.
Before the coronavirus hit, the WRU was pumping around £20 million into the PRB pot and this new influx of cash was set to bump that figure up.
But in November, Covid-19 hadn’t happened.
The Welsh Rugby Union is predicting a substantial financial loss this year, stating they could lose up to £50 million if they can’t host any games this autumn.
Therefore, it looks unlikely that the WRU will be able to provide that base figure of £20 million.
CVC investment money could be used to boost the PRB pot back up to that £20 million, meaning the funding available would be at least the same as last season, but that is far from guaranteed.
It all depends on how badly the coronavirus affects the Union.
The WRU have furloughed a significant portion of its staff, with pay cuts affecting players and backroom teams across the board.
Even with an investment of around £30 million flowing into the game – which is not coming all in one go, don’t forget – it still leaves the WRU facing huge financial challenges.
So, whilst the investment is certainly welcome, it may only serve to make a deeply challenging period marginally less so.