SA Rugby releases statement on foreign investment

It has recently been reported that SA Rugby has entered into advanced negotiations with American company Ackerley Sports Group (ASG) for an alleged R1.42 billion ($75 million) investment that could be finalised as soon as May if the deal is successfully approved by SARU members.

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However, this has been met with questions and resistance from local franchises, and SA Rugby has released two statements this week in order to try and clarify matters.

SA RUGBY RELEASED AN OPEN LETTER ABOUT FOREIGN INVESTMENT

By Rian Oberholzer, CEO, SA Rugby

That conversation is incomplete, and any agreement that may ultimately be reached, requires the approval of the 14 member unions of SA Rugby before it could be signed.

But there has been much speculation, misdirection and misunderstanding of what the purpose and practicalities of such an agreement involve. Let me put the record straight.

If you take only one thing from this letter, let it be this: The Springboks are not being sold – not now and not ever.

If the private equity deal is approved, it will entail a company investing in a minority shareholding in the commercial rights to SA Rugby’s activities in a newly created Commercial Rights Company (CRC). SA Rugby will remain the majority shareholder.

The CRC will not be responsible for the management or selection of any national teams nor for the management of competitions. It will be based in South Africa and have an operational staff transferred from the existing structures, augmented by international expertise and consultants. It will be SA Rugby’s commercial arm, a subsidiary to the mother body.

What it means in short is that SA Rugby’s commercial activities of selling broadcast and sponsorship rights and running events will continue as before, only in partnership with a company with international experience who believe that our revenues are capable of meaningful increase. This is a good thing.

That is the “what” is happening, but just as important in answering the question, “why are we doing it”?

It’s simple: the Springboks are back-to-back world champions, but off the field the financial sustainability of rugby is far from world class.

The sport took extreme measures to survive the COVID pandemic, but we have zero reserves, and a similarly cataclysmic financial disaster would wipe out the sport as we know it in this country.

Similarly, our peers at international level outperform us in the global commercial markets and we have long needed a step change in our business to generate the income to keep the Springboks on top and, among many other things, help our women one day win their World Cup.

We can’t produce that step change alone and from the foot of Africa, so we have actively sought a partnership with an organisation possessing the platforms, networks, and relationships to enhance our commercial value.

We believe we have found potential partners with those attributes who will join us in the CRC, which will be dedicated only to organically elevating our commercial presence.

I hope I have made it clear that this process is not about a quick cash injection; it is about securing the long-term financial sustainability of the sport of rugby in South Africa so that our international teams can compete on a level playing field.

It will provide us with reserves to weather future storms and the capital to invest in strategies to put us on a par with international best practice on and off the field.

We are not selling the Springboks; we are not ceding away any rights; we are building a new company with a minority shareholder to give the Boks (and the rest of rugby) the commercial resources to ensure that the idea of a Three-peat is not just a pipe dream.

Together with the right commercial partners we will be Stronger.

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Q&A ON THE MATTER

What is the state of play? SA Rugby has been approached by private equity companies who wish to acquire a shareholding in the sport’s commercial activities.

Why would you do such a deal? A private equity partnership offers not just an immediate financial boost but also crucially provides the expertise, networks, and resources necessary to enhance the commercial value of South African rugby. This collaboration can position SA Rugby, the Springboks and, eventually, other teams for greater global prominence.

Who are you talking to? The preferred bidder is Ackerley Sports Group (ASG), an American company that is an expansion of an investment company established in 2002 by brothers Ted and Christopher Ackerley. Ackerley Partners have owned all or a part of several professional sports franchises in American basketball, ice hockey, soccer, and rugby, and recently partnered with 49ers Enterprises to assume majority control of the Leeds United Football Club.

Why did you choose ASG? They were unanimously chosen by the members of SA Rugby – including the franchise owning unions – at a General Meeting of SA Rugby on 7 December 2023 after ASG, and another bidder, CVC, made presentations to the meeting. ASG’s offer primarily focuses on immediate financial gain and guaranteed income, with lower thresholds for contingency payments, presenting a straightforward proposal for a commercial partnership, which we believe could offer comprehensive advantages to our organization. The ultimate decision will hinge on balancing the immediate financial requirements with the long-term strategic objectives of our rugby organisation.

Is it a done deal? No, our team was mandated to pursue further discussion. The members of SA Rugby have agreed on the primary conditions, however, substantial effort is ongoing behind the scenes to finalise the specifics. Since the finer points are critical, no final approval will be granted until our members have been thoroughly briefed and a mandate secured. This process can only be agreed upon once our 14 members have approved it.

Who has sign off? Only one body – the member unions of SA Rugby, the sport’s shareholders. It cannot happen without their approval.

When will they see the details? Once a proposed final structure for the new company and its relationship with the existing SA Rugby structure has been finalised a series of workshops and information sessions will be undertaken to allow member unions to fully interrogate the deal. That structure is still a work in progress.

Are you selling the Springboks? No. The Springboks and all national teams will retain their existing management and ownership models. As national institutions, the Springboks and SA Rugby are not transferable to private equity. This strategy is about harnessing our commercial rights in partnership with an organisation, creating a separate entity dedicated to elevating our commercial profile.

So how will the Springboks be paid? The new commercial entity will remit an annual fee to cover all current operations of SA Rugby – from paying the Boks to providing funding to the unions.

What are the next steps: Once a proposed post-deal structure is nearing finalisation it will be workshopped with member unions. Until such time as that position has been reached it would be counter-productive to speculate on.

Is there a deadline for approval: While not definitive, it is anticipated that a conclusive proposal will be presented to the members at the Annual General Meeting scheduled for 30 May 2024, for their approval or rejection.

In news actually provided by the Ackerley Sports Group, the partnership agreement would apparently see an investment in South African rugby at all levels, supporting the professional game, and growing the revenue base of the Springboks and SARU’s commercial activities.

“Under the terms of the agreement, which remains subject to further negotiations and final approval by the constituent members of SARU, ASG will invest in a Commercial Rights Corporation (CRC), which will hold all current and future revenue-generating assets of the Springboks and SARU. CRC will be majority owned by SARU, with ASG taking a significant minority interest,” according to a statement.

You can read more about this major investment here

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ABOUT ACKERLEY SPORTS GROUP

Ackerley Sports Group was formed in 2023 by Christopher and Ted Ackerley of Ackerley Partners, LLC in Seattle, WA along with their London-based partner – Timothy Kirkwood who brings a prolific background in international finance and investment banking. The platform invests in the sports sector with a focus on leagues, teams, venues, media, technology and development opportunities.