AB soul sold

[Ymx]

https://www.reuters.com/markets/funds/n ... 022-02-16/

Feb 17 (Reuters) - New Zealand Rugby (NZR) and the New Zealand Rugby Players Association (NZRPA) have approved a partnership agreement with U.S. private equity firm Silver Lake, NZR and NZRPA said on Thursday.

The partnership will provide "capital to invest in the game at all levels", they said in a statement, with Silver Lake to invest NZ$200 million ($133.74 million) in a new commercial entity that will "house all revenue-generating assets of NZR".

Silver Lake, NZR and NZRPA will also invest together in rugby-related businesses outside of New Zealand.

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"In the privileged role we hold as guardians of our national game, we are proud of where we have landed with this partnership," NZR Chairman Stewart Mitchell said.

"I want to acknowledge that the journey to get here hasn't been easy at times, there was healthy debate and some adjustments by all parties, but always with the good of the game at the heart of this process."

In April, 26 constituent provincial rugby unions approved the sale of a 12.5% stake in NZR's commercial arm, including rights to the All Blacks, to Silver Lake in a deal worth NZ$387.5 million. read more

But the NZRPA opposed the deal and counter-proposed the sale of a 5% stake through an initial public offering in the country's stock market.

NZR said Silver Lake would own between 5.71-8.58% of the established 'NZR CommercialCo' after an additional co-investment later this year, compared to the 10-15% stake that had been previously proposed.

The co-investment will be offered to New Zealand-based institutional investors.

"A minimum of NZ$62.5 million will be offered, with the potential to seek up to NZ$100 million if parties agree. Silver Lake will underwrite this institutional syndication if it is not fully subscribed," the statement said.

"NZRPA is excited for this partnership and what it means for the future of rugby," NZRPA CEO Rob Nichol said. "It addresses our fundamental principles ensuring a true comprehensive partnership, allowing us to invest together in rugby globally, and establishing the right governance models.

"Silver Lake have shown great integrity and a commitment to getting the right deal in place. They were willing to listen to everyone and understand what rugby means to people in our country.

"We are confident that Silver Lake is the right investment partner."

[Grandpa]

Better than it was... but would still prefer there to be no ownership percentage.

[Ymx]

I’d really like to see what exactly the sub company comprises of.

I’m hoping it’s not just that for a one off lump sum they’ve sold revenue share, top line only. Ie excluding all the costs of the NZRFU.

It says house all revenue generating assets. Like skimming purely the revenue, and eating directly in to margin.

So, really need to understand what that means - excludes the loss of the pure grassroots?? But includes AB revenue and TV money

[Hugo]

What's the long game for Silver Lake? Expand their ownership stake until it is 51%+?

[Ymx]

When NZRFU find they are making a loss after forking out the silver lake revenue share, they can always sell more of a chunk to remain afloat !

[Dan54]

Geez fellas, is hard to be so negative about everything? They have 7% of profits, for $200mill if losing 7% of profits is suddenly going to put NZR in loss they must of been making a shitload of money that we haven't noticed.
Grab a calculator and work it out! The whole idea for Silver Lake is to get them making MORE monsy through digital stuff (I assume streaming, online games etc) and then sell their share for more money. The only way for it to work is for NZR to make more money!

[Guy Smiley]

What's the long game for Silver Lake? Expand their ownership stake until it is 51%+?

They're in it for the cash. They see a product that has unique profitability in their mode of business. Diluting the product via increased ownership won't enhance their earnings... think of it as selling glamour. Adding a seedy old bloke in a shiny suit doesn't make the model look any better.

I don't share the pessimism. I think it's based on kneejerk reaction. The original proposal was flawed... and I had my doubts about the Players' Association's motives at the time, but they seem to have wrangled a decent solution and outcome.

[Sinkers]

Geez fellas, is hard to be so negative about everything? They have 7% of profits, for $200mill if losing 7% of profits is suddenly going to put NZR in loss they must of been making a shitload of money that we haven't noticed.
Grab a calculator and work it out! The whole idea for Silver Lake is to get them making MORE monsy through digital stuff (I assume streaming, online games etc) and then sell their share for more money. The only way for it to work is for NZR to make more money!

This is all true - but easy and quick ways for PE firms to increase their return are to do things like increase prices to the consumer, reduce operating costs like headcount/ salaries and sell off/ close down bits that aren’t profitable

It’s fair to be concerned whether Silver Lake have the intention or influence to do any of those.

[Dan54]

Yep me and you both Guy, I like the idea that $100mill worth has been held to sell to kiwi investment. As you say if Player's association had something to do with it (and I suspect they did reckon Kirk wants aBarr-Forsyth to have a share) I think it good. As you say Silver Lake just want to make the brand worth more money and then gat a profit on their shares, so makes AB brand worth more.

[Jim Lahey]

I make no pretences to know about the state of grassroots rugby in NZ but what exactly will the additional funding provide?

Surely you already have armies of talented young blokes/ladies coming through the system and are consistently the best team in the sport. Even when you lose players to Europe you have plenty of replacements, and the core group usually remains (might take a season sabbatical in Japan but this seems from the outside to be a well managed process).

Its already the biggest sport in the country by a distance. The brand is untouchable and most young lads probably dream of playing for their country. I'm not sure how much juice you can squeeze out of that orange.

[Guy Smiley]

Not losing players to Europe would be a massive boost for NZR, it’s too easy to underestimate the threat this presents.

Alongside that though, is the potential to grow into the US market… and from there into the playing market. Then there’s the satellite benefits like streaming tech and the like.

[Grandpa]

Maybe Silverlake can keep SA in the Rugby Championship.. else I fear for the future of Southern Hemisphere rugby if they join the Six Nations in 2025..

[Jim Lahey]

Not losing players to Europe would be a massive boost for NZR, it’s too easy to underestimate the threat this presents.

Alongside that though, is the potential to grow into the US market… and from there into the playing market. Then there’s the satellite benefits like streaming tech and the like.

How would this work on a practical level though? You only have 5 franchises and massive pool of players. Would adding more franchises water down the product? Maybe not, I dunno.

I know the NPC has a great standard of rugby but I'm a real rugby bloke and I would not go out of my way to watch it, as I have no ties to NZ. I just don't see a bunch of gringos investing themselves in watching NZ provincial teams playing what is a relatively foreign sport to them.

I suppose its a matter for the PE guys. Take your money and run

[Dan54]

Not losing players to Europe would be a massive boost for NZR, it’s too easy to underestimate the threat this presents.

Alongside that though, is the potential to grow into the US market… and from there into the playing market. Then there’s the satellite benefits like streaming tech and the like.

How would this work on a practical level though? You only have 5 franchises and massive pool of players. Would adding more franchises water down the product? Maybe not, I dunno.

I know the NPC has a great standard of rugby but I'm a real rugby bloke and I would not go out of my way to watch it, as I have no ties to NZ. I just don't see a bunch of gringos investing themselves in watching NZ provincial teams playing what is a relatively foreign sport to them.

I suppose its a matter for the PE guys. Take your money and run

It's not about adding more franchises, more about keeping top players, and still being able to support the grassroots to keep the players coming through.
There is no way Silver Lake is interested in selling NPC to the world, they are interested in All Black's brand. I can see online games etc, and streaming etc. Silver Lake I imagine are not guessing they going to make the brand even bigger with digital stuff, but would be pretty confident. They not into thia because they like rugby, but to expand on whats there to increase value and make money, and if they make money, so do NZR, which then haelps to retain top players AND help out the levels below.

[Guy Smiley]

Not losing players to Europe would be a massive boost for NZR, it’s too easy to underestimate the threat this presents.

Alongside that though, is the potential to grow into the US market… and from there into the playing market. Then there’s the satellite benefits like streaming tech and the like.

How would this work on a practical level though? You only have 5 franchises and massive pool of players. Would adding more franchises water down the product? Maybe not, I dunno.

I know the NPC has a great standard of rugby but I'm a real rugby bloke and I would not go out of my way to watch it, as I have no ties to NZ. I just don't see a bunch of gringos investing themselves in watching NZ provincial teams playing what is a relatively foreign sport to them.

I suppose its a matter for the PE guys. Take your money and run

I'll say it again...

the player drain to richer comps is hurting NZ massively. You're ignoring that and think this is all about more games or more teams.

It's not.

It's about securing what we have and enhancing that through greater exposure, the commercial potential is huge. As for a bunch of gringos... the US market feeds on hype. You package up the concept of physicality, tribal backgrounds, haka... no bodypads in a brutal contact sport and sell that into Friday night and you've got Product.

Add serious financial backing at last and you can grow a Pacific Basin rugby scene. Bring Japan under the umbrella. Play games on the West Coast of the US. Chuck a leg over China, support the SE Asian comps. NZ already exports coaching expertise by the truckload... set up training programs in some of those national set ups.

We go from bleeding talent to the NH pro scene to growing it in a SH scene... or perhaps more correctly a Pacific scene. That's our home. We already have strong cultural links encompassing the region.

That's the sort of money making concept I imagine Silverlake would be looking at. If they're not, I'm available.

[Jim Lahey]

Not losing players to Europe would be a massive boost for NZR, it’s too easy to underestimate the threat this presents.

Alongside that though, is the potential to grow into the US market… and from there into the playing market. Then there’s the satellite benefits like streaming tech and the like.

How would this work on a practical level though? You only have 5 franchises and massive pool of players. Would adding more franchises water down the product? Maybe not, I dunno.

I know the NPC has a great standard of rugby but I'm a real rugby bloke and I would not go out of my way to watch it, as I have no ties to NZ. I just don't see a bunch of gringos investing themselves in watching NZ provincial teams playing what is a relatively foreign sport to them.

I suppose its a matter for the PE guys. Take your money and run

I'll say it again...

the player drain to richer comps is hurting NZ massively. You're ignoring that and think this is all about more games or more teams.

It's not.

It's about securing what we have and enhancing that through greater exposure, the commercial potential is huge. As for a bunch of gringos... the US market feeds on hype. You package up the concept of physicality, tribal backgrounds, haka... no bodypads in a brutal contact sport and sell that into Friday night and you've got Product.

Add serious financial backing at last and you can grow a Pacific Basin rugby scene. Bring Japan under the umbrella. Play games on the West Coast of the US. Chuck a leg over China, support the SE Asian comps. NZ already exports coaching expertise by the truckload... set up training programs in some of those national set ups.

We go from bleeding talent to the NH pro scene to growing it in a SH scene... or perhaps more correctly a Pacific scene. That's our home. We already have strong cultural links encompassing the region.

That's the sort of money making concept I imagine Silverlake would be looking at. If they're not, I'm available.

I get what you're saying but how can you retain the legions of players you are losing while simultaneously bringing through the same numbers of young players, without having more teams? There are currently only 75 starting spots in NZ teams.

Its a supply and demand problem that Irish rugby is starting to face, especially in Leinster, except the issue seems to be younger guys going to England as they can't get a game ahead of the more established older players in the squad. Some can be shipped off to the other provinces but that dilutes the traditionally tribal nature of Irish provincial rugby, which I'm sure is a similar concern in NZ.

I'm sure Silverlake know what they are doing in terms of commercial ambitions but I just struggle to see it at this point becoming a major thing in the States in the short to medium term. I hope I'm wrong though.

[Dan54]

Answer to question is Jim, if you keep more good young players with no extra teams, you end up strengthening the teams you have.

[Grandpa]

Answer to question is Jim, if you keep more good young players with no extra teams, you end up strengthening the teams you have.

Exactly...

But I'm still very worried about SA leaving the RC completely. Wonder if Silverlake can tempt them to stay...

[not_english]

I'm not convinced they will spend this money wisely. The lesson of professional sports seems to be that more money comes in and the fans keep having to pay more and more. Not sure there was really any need for these changes.

[Dan54]

Answer to question is Jim, if you keep more good young players with no extra teams, you end up strengthening the teams you have.

Exactly...

But I'm still very worried about SA leaving the RC completely. Wonder if Silverlake can tempt them to stay...

Me too mate, though I suspect by 2026 there will be different comps happening.

[Guy Smiley]

Answer to question is Jim, if you keep more good young players with no extra teams, you end up strengthening the teams you have.

Exactly...

But I'm still very worried about SA leaving the RC completely. Wonder if Silverlake can tempt them to stay...

Where are they going to go?

SA need the RC. All the talk of them joining the 6N is a beat up. I think it's possible there's some sort of effort underway to promote the idea, whether by misinformed wishful thinkers or some sort of destabilising campaign to wedge interests and open an opportunity... but it's pie in the sky stuff for now.

My concern is more parochial. I want to see NZR get innovative and start opening up opportunities across the Pacific. There's already been talk of Japan joining the party for a 5N comp. With their lucrative club scene providing sabbatical opportunities for our players already, I like that greater possibility as both a revenue source AND a development tool for players and coaches. It would serve SA well to remain within that structure for their own development and the revenue streams.

[Kiwias]

I get what you're saying but how can you retain the legions of players you are losing while simultaneously bringing through the same numbers of young players, without having more teams? There are currently only 75 starting spots in NZ teams.

Its a supply and demand problem that Irish rugby is starting to face, especially in Leinster, except the issue seems to be younger guys going to England as they can't get a game ahead of the more established older players in the squad. Some can be shipped off to the other provinces but that dilutes the traditionally tribal nature of Irish provincial rugby, which I'm sure is a similar concern in NZ.

I'm sure Silverlake know what they are doing in terms of commercial ambitions but I just struggle to see it at this point becoming a major thing in the States in the short to medium term. I hope I'm wrong though.

The youngsters play NPC for 2~3 more seasons, then challenge the incumbent in their position in SR, meaning both levels get stronger and we create greater depth in NZ rugby.

[Grandpa]

Answer to question is Jim, if you keep more good young players with no extra teams, you end up strengthening the teams you have.

Exactly...

But I'm still very worried about SA leaving the RC completely. Wonder if Silverlake can tempt them to stay...

Where are they going to go?

SA need the RC. All the talk of them joining the 6N is a beat up. I think it's possible there's some sort of effort underway to promote the idea, whether by misinformed wishful thinkers or some sort of destabilising campaign to wedge interests and open an opportunity... but it's pie in the sky stuff for now.

My concern is more parochial. I want to see NZR get innovative and start opening up opportunities across the Pacific. There's already been talk of Japan joining the party for a 5N comp. With their lucrative club scene providing sabbatical opportunities for our players already, I like that greater possibility as both a revenue source AND a development tool for players and coaches. It would serve SA well to remain within that structure for their own development and the revenue streams.

Do SA need the RC if the Six Nations welcomes them at some point? May not be in 2025 but you get the feeling it will happen at some point.

The rest of your post I agree with. Japan to join the RC... as for NZ using the Japan league as a development tool, Kiwias will know more, but would Japan welcome that? There are a lot of ex Kiwi coaches and players there now... how many is too many as far as Japan is concerned? And would they accept more lesser known coaches and players... don't we have the NPC for that?

[Ymx]

The whole Silverlake will help them make more money in the US is nonsense. They won’t change the US market. It’s going to be the same revenue pots as it has always been.

Perhaps they are better negotiators than NZRFU for those deals? Well I’m sure they are, given they have just bought part of the revenue stream of a guaranteed monopoly. It’s not like the NZRFU can just close it all down, and set up again.

Also, Silverlake will simply be looking to restructure for ebitda and flip in 5-10 years to another PE firm, as an activist investor. It’s just ebitda, leverage and multiples for them, they run funds to generate performance for their investors. No morals. Just money making.

I’m worried that the NZRFU entity as a whole will now be trying to make ends meet, but with less of the revenue share. 8% is a lot less when it comes to a companies margin. Most companies try and run and about 20% plus. However struggling companies it’s single or negative figures, where losing 8% more is fatal.