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Provincial rugby unions in line for cash boost if they accept Saru’s R1.3bn American equity deal

Provincial rugby unions in line for cash boost if they accept Saru’s R1.3bn American equity deal
South African captain Siya Kolisi in action during the Rugby Championship match against New Zealand at Ellis Park, Johannesburg on 31 August 2024. (Photo: EPA-EFE / Kim Ludbrook)
Craig Ray
By Craig Ray
10 Oct 2024
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Saru’s general council must vote to decide if they agree to sell a 20% stake to American investors Ackerley Sports Group, which will lead to an immediate cash boost.

A cash injection of $75-million (R1.3-billion), a portion of which will be split among South African rugby’s 15 provinces, is just one compelling incentive for member unions to vote for an American-based equity partner. 

That is the immediate sweetener to a proposed equity buy-in by Seattle-based consortium Ackerley Sports Group (ASG). But improved earnings and increased value of South African rugby in the medium and long term is the major prize. 

Over the past three years, the South African Rugby Union (Saru) has been actively seeking an equity partner to boost cash flow and reserves, and increase SA Rugby’s global exposure. 

The Springboks winning the past two editions of the World Cup has positively aided the search for equity investment as they are a popular and attractive commodity. 

And make no mistake, in the world of equity investments, sports teams and players are commodities just like gold and silver. 

After a lengthy search, ASG emerged as Saru’s equity partner frontrunner and were presented as the preferred bidder to Saru’s general council last December. 

There were initial objections from the four big unions, via their own equity investors, who don’t officially hold any influence at general council level because they aren’t members. 

Indications are that the ASG deal should go through at Saru’s general council (made up of representatives of the 15 provinces) vote next week.  ASG must also present final financial guarantees if the vote is positive. 

Roadshow


This week, Saru chief executive Rian Oberholzer, president Mark Alexander and others from the organisation have been on a roadshow to the various local unions to present the ASG offer for their approval. 

Members were asked to sign non-disclosure agreements about the exact details of the deal. Saru, though, has committed to revealing more information about the structure of the contract if it achieves a 75% majority at the vote, scheduled for 17 October.

The Saru general council, made up of its 15 members, will vote whether to accept the initial $75-million (R1.3-billion) from ASG for a 20% stake in South African rugby. Reports earlier this year indicated that ASG valued Saru at $375-million. 

ASG will run its investment through a newly established structure while Saru will be the majority shareholder in a new commercial entity that will be established, if approved.

While the cash injection up front is important, it’s the longer-term vision to drive up the value of the Boks, in particular, that could have positive future spin-offs. 

“We are very pleased to have arrived at this point and believe we will be able to table an offer to our members that makes commercial and business sense,” said Oberholzer. 

“This is a watershed moment for rugby in South Africa as we attempt to ‘globalise’ the Springbok brand in the way that our peers in New Zealand have. 

“Private investment will bring financial security as well as the capital investment and global experience and networks to enhance how we communicate, how we do things and how we interact with our stakeholders. 

“Private investment has taken place in several of our member unions and is commonplace in global sport,” added Oberholzer. 

“Our performances on the field have kept us near or at the front of the pack for several years, but we have been lagging off the field. This is our opportunity to catch up with our peers in that arena as well.” 

Saru CEO Rian Oberholzer believes the proposed equity deal with ASG is the best on the table. (Photo: Grant Pitcher/Gallo Images)


Boks outgrown SA market 


Much like the All Blacks in New Zealand, the Springboks, on a commercial level, have outgrown the South African market. 

Despite being double world champions, newly crowned Rugby Championship winners, Lions series winners and regarded as the best team in the world, the Boks’ commercial value is an estimated three times smaller than the All Blacks. 

And the major reason for that is that New Zealand Rugby, commercially, took the All Blacks out of their own country and went global. The All Blacks’ shirt sponsors are not New Zealand companies, they are large global entities while they also did an equity deal with Silver Lakes Capital. 

Saru intends to do the same with the Boks.

Bok skipper Siya Kolisi on the charge during the Rugby Championship clash against the All Blacks at Emirates Airline Park on 31 August 2024. EPA-EFE/KIM LUDBROOK



The price for the Boks’ front-of-jersey sponsorship, currently held by cellular giant MTN, is set to at least double when it goes back to market. 

Daily Maverick understands that Saru is seeking $9-million, up from its current $4-million for the space on the front of the jersey. 

That is just one example of how undervalued the Boks are at this stage and, through a partnership with a global ally such as ASG, that value could double and triple in a few years. 

The trickle-down effect is obvious. More value and better deals means more money, which can flow to smaller unions. They are important providers of players, which keeps South African rugby strong. 

Attractive investment 


In addition to the Boks being reigning double world champions, having the most recognisable and revered leaders in captain Siya Kolisi and coach Rassie Erasmus, has also helped.

The image of a fully transformed team and sport, led by inspirational and innovative men such as Kolisi and Erasmus, has also boosted the standing of the Boks and, by extension, the entire South African rugby ecosystem. 

South Africa’s inclusion in the Vodacom United Rugby Championship  (URC) since 2021, the rapidly growing cross-hemisphere tournament, has further boosted value. The Stormers and the Bulls have each played in two of the three URC finals with the former winning the title in 2022. 

South Africa’s four major clubs – the Bulls, Lions, Sharks and Stormers, as well as the Cheetahs – also participate in European Professional Club Rugby (EPCR) competitions, adding further exposure in lucrative markets. 

The Sharks won the 2023/2024 EPCR Challenge Cup earlier this year, underlining the strength of the South African game. 

Adding value 


When Saru started on the equity partner search almost four years ago, it was largely only focused on CVC Capital Partners out of Luxembourg. 

And for good reason. CVC was already established in rugby with stakes in the Six Nations, URC and the English Premiership totalling close to £700-million (R16-billion). 

Saru needed a financial buffer to be sure that if another pandemic hit, there would be enough money to survive.  

But when ASG entered the picture, Saru’s needs and focus shifted slightly from only being enticed by a one-off cash injection, to a multifaceted approach. 

The Americans, according to several sources, would contribute far more in driving up earnings and value. 

CVC certainly puts money in, but its general approach has been to wait until the value of the product (Formula One being its most high-profile acquisition) increases and then sell at a huge profit. It is, after all, in it to make a profit. 

Not that ASG is not, but it seems the Americans are willing to pull more weight on the commercial front to increase the value of South African rugby, primarily through the Springboks. 

One source said that Saru’s long-term financial outlook without equity investment indicated an income of R1.7-billion in 2027. 

ASG has apparently already pushed that income estimate to R3-billion, based on its commercial plans. 

ASG intends to leverage sponsors through its wide range of existing partners, and also untapped companies in the American and global markets. 

ASG owns stakes in sporting franchises such as last year’s losing Super Bowl finalists the San Francisco 49ers, NHL (ice hockey) team the Seattle Kraken and soccer team Leeds United in the England second-tier Championship.   

Saru has chosen ASG and, right now, it’s the only realistic deal on the table. If the unions reject it next week, then it’s back to the drawing board in terms of finding equity investment. 

It would certainly weaken Saru’s hand if it had to return to the market in search of an alternative equity partner after a four-year dance. CVC, for instance, would almost certainly come in with a lower offer, if it even came back at all. 

This feels like a massive moment for the future of South African rugby. Hopefully, proper due diligence has been done by both Saru and the unions which must decide, because the future of rugby could well depend on it. DM

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