Battle for control of rugby

SA Rugby's struggle to conclude an equity deal is the first salvo in the battle for control of the sport in this country.

An SA Rugby insider who spoke to the Sunday Times on condition of anonymity delivered this warning in the week the game's governing body had to take a step back from the proposed 20% sale of its commercial rights to the Seattle-based Ackerley Sports Group (ASG) for $75m (R1.32bn).

A meeting scheduled for last Thursday which was to determine the fate of the deal was postponed at the behest of sport, arts and culture minister Gayton McKenzie as an imbroglio around the proposed equity partnership took hold.

There had been growing discontent over the deal, so much so that disgruntled franchise owners have pooled their resources to come up with a counterproposal. One franchise owner confirmed they are trying to structure a deal and though details are sketchy he insisted they are trying to create an environment which would benefit the rugby community at large.

This is the first phase of an attempted total takeover of the equity partners to the detriment of ... South African rugby. I'm convinced, after all I heard this week

—  SA Rugby insider

The Sunday Times understands the franchise owners have assembled a team of individuals based in the Cape and KZN to co-ordinate a deal.

“People have been speaking to a bank about financing,” said the franchise owner. “There is a question about whether we can put together a package for an equity deal of 20%. I think we have to help. We are all in it together.”

The SA Rugby insider, however, views the actions of the disaffected parties differently. He said last week's letter to the South African Rugby Union (Saru) on behalf of the Bulls, Lions, Sharks, Stormers, Free State, Griquas and Boland which questioned the deal came “like a slap behind the head”. He insists ulterior motives are at play.

“There is definitely an agenda being driven by the equity investors in the provinces and franchises. They say equity deals are bad for rugby ... yet they are investors in rugby.

“This is the first phase of an attempted total takeover of the equity partners to the detriment of the bigger South African rugby picture. I'm convinced after all I heard this week.”

He added that a franchise representative had told him that once they have control (of SA Rugby) they will start closing provinces.

“The first thing they do is say this deal is no good and that they will bring their own deal which will be negotiated by their CEOs.”

The franchise owner admitted opposition to the ASG deal has presented fertile ground for a shake-up in South African rugby but stressed he was not interested in taking control.

“This is not just about the deal,” said the franchise owner. “We have to figure out the very structure of how this is done, the relationship between the franchises and Saru. It is not sustainable. This deal gives us the opportunity to really work it out.”

He said the franchise owners were there to help and that a fresh spirit of collaboration among them has been fostered, in part due to the creation of a WhatsApp group.

“What people don't really understand is that the franchises are effectively helping already. We are already financing South African rugby. I personally write cheques every year because all the franchises are operating at a loss.

“I pay our Springboks and Saru is paying a little for the Poni (players of national interest) but it's not enough. And they often don't pay. What they are progressively doing is shifting their losses onto the franchises because the franchises are privately owned.”

Now there is a massive trust issue, the way it always unfolds. There's no information, a road show with a few franchises at a time is very orchestrated and manipulative. I think they're pushing an unreasonable and potentially corrupt deal onto the franchises. There has to be some accountability

—  Franchise owner

The proposed deal with ASG has divided opinion in rugby circles. Though SA Rugby insists details about the deal had long been in the domain of the provinces and franchises, nagging questions remain.

The franchise owner disputes that the flow of information from Saru has been timely.

“Now there is a massive trust issue, the way it always unfolds. There's no information, a road show with a few franchises at a time is very orchestrated and manipulative.

“I think they're pushing an unreasonable and potentially corrupt deal onto the franchises. There has to be some accountability.”

One provincial president, speaking anonymously, said two sticking points are widely shared among the disaffected provinces. “The two major problems for all of us is the Test model (how funds from hosting Tests are generated and distributed) and the commission (from the ASG deal). We believe 15% [finders fee] is outrageous and who stands to benefit?”

The franchise owner harboured reservations. One in particular would have spooked rugby followers far and wide. “They (Saru) are giving up control. They have a board that has three Ackerleys, three Saru reps and an independent chair that is appointed by Ackerley. That is effectively giving up control. That is a big issue.

“Other (franchise) owners also had a problem with the Ackerleys having to be paid back all their money plus a 6% return.”

He insisted that a replacement plan had to be found and countered Saru's insistence that an exclusivity period for negotiations with ASG until the end of the year needs to be honoured. “That's bulls***. I do deals. I'm sceptical the Ackerley Group has the money. In fact, up until a few weeks ago they were still looking for an investor to put up half the money.

He said he never understood ASG or their motives. “We are the top rugby nation in the world. The Springboks are a precious asset for the country. They (SA Rugby) end up choosing this small entity.”

He said ASG was not a private equity firm, consisting only of two brothers who have made small investments in sport.

“What they do is what is referred to is a 'fundless sponsor'. They are effectively fund raisers. They bring in consultants to help make investments. They don't have $75m.”

SA Rugby has questioned the timing of the push back to the deal. The SA Rugby insider said the deal with ASG was similar to the rejected offering from CVC Capital Partners and that those terms had not been met with objections from the franchises or provincial unions. SA Rugby rejected the CVC deal because it believed it could get a better deal elsewhere.

On that score, the franchise owner concluded the opposition to the ASG deal should have been made public earlier. “Potential investors in that deal would have seen it. Then you are not investing in chaos.”

Asked to explain how their offering would fundamentally differ to the one ASG has on the table, the franchise owner said: “I just don't know if it would be straight equity. I don't need control. If I had 20% I might have some minority protections but I don't want control. I might have a voice in the form of one person on a board. I would totally understand that.”

In a climate of suspicion, subterfuge, half truths and distrust a resolution seems distant.

What is widely agreed on is that SA Rugby needs a cash injection but how and who administers the shot in the arm is dividing opinion.

SA Rugby will conduct further engagements with the franchises and provinces to fully explain the ASG deal. Their executive committee will meet on December 6 to decide its fate.