Saru left with hefty bill after Ackerley equity deal rejected by provinces

Rian Oberholzer during the WP Rugby and City of Cape Town press conference at DHL Stadium on 1 March 2023 in Cape Town, South Africa. (Photo: Grant Pitcher / Gallo Images)

By Craig Ray

24 Jan 2025

Saru’s search for an equity partner will continue but it is counting the cost of the failed Ackerley deal.

The failed deal to sell a stake in South African Rugby to American consortium Ackerley Sports Group has come at a cost of R14-million.

That’s according to a letter sent by the South African Rugby Union (Saru) company secretary to the 15 member unions.

Tensions have escalated in the wake of the failed bid by Ackerley Sports Group to buy a 20% stake in SA Rugby for $75-million (R1.4-billion).

At a vote of Saru’s general council in December, the 13 eligible voting unions went 7-6 against proceeding with a deal that had been more than a year in getting to that point. It needed 75% to succeed, so it wasn’t even close.

That is the strength of Saru’s structure, and possibly its weakness. All the provinces get to decide on seismic matters such as this, and their mandate was clearly that they weren’t happy with the final offer and details.

Mandate

It’s always worth remembering in this story — because it seems to be brushed over too easily — that Saru received a 100% mandate from its members to pursue the Ackerley Sports Group deal over CVC Capital in December of 2023. They went through the process, which includes hiring lawyers, mergers and acquisitions specialists and novation experts for the possible transfer of Saru’s existing commercial partners into a new Commercial Rights Company, had the Ackerley deal passed.

That all comes at a cost, which Saru outlined to be R14-million at this stage, with some invoices still to come in. There is nothing obviously untoward about this.

The commission structure of the deal appears to be the biggest point of concern for the provincial unions that voted against it.

URC and EPCR participation has cost SA Rugby R330m – but it’s short-term pain for long-term gain Saru CEO Rian Oberholzer. (Photo: Grant Pitcher / Gallo Images)

“The commission payable to Commercial Agent for successfully concluding an equity transaction was set at 15% (fifteen per centum) of the transaction value,” the letter reiterated.

“This commission was a gross percentage against which the Equity transaction professional and transactional costs would be paid by the Commercial Agent on behalf of Saru which professional fees were estimated to be 5% (five per centum) of the 15%.”

What some disgruntled unions are questioning is that R14-million translates to about 1% of the original deal value of R1.4-billion. If the full 5% commission had to be paid to the commercial agent, it would be close to R70-million. They feel this needs more clarity.

Read more: Saru vote for equity sale faces major barriers from dissident unions still unhappy with structure

Win by One

The fact that Saru CEO Rian Oberholzer was named as the only office bearer of the registered Commercial Rights Company called Win by One (Pty) Limited has also been questioned.

The establishment of this Commercial Rights Company was well documented last year, but some reporting has suggested that it was “mysterious”. It’s actually fairly common practice in this type of deal.

“Saru has noted, with concern and alarm, the irresponsible and deliberately pejorative media reporting around the Equity Transaction and the inclusion and allegations on the person of the CEO regarding the incorporation by (consulting company) BDO Inc. of a 100% Saru held company upon the instruction of the Saru Company Secretary,” the letter to members read.

“In order to trade from 1 January 2025 (if the proposal was approved) a new SA entity was required to hold the shares in Saru’s commercial rights — which would initially be 100% owned by Saru.

“The equity partner would acquire its shareholding from that entity. In addition, there was a requirement to have a tax registered company that could trade as the new commercial rights company immediately.

“For convenience’s sake that entity was called ‘Win by One’.

“The creation of the company Win by One (Pty) Limited was a technical process performed by BDO Inc., on the instruction of the company secretary.

“The power to create such an entity is covered by clauses 7.16 and 7.17 of the constitution and requires the naming of at least one director until the Board of the new company would have been constituted.

“The Saru CEO, as the public officer, was appointed in the Interim until a Board of Directors could be constituted as would be required in the

Equity Transaction documents. The company is currently dormant and will remain so until such time that alternative uses can be identified.”

Management review

Saru has taken the step to set up a review by an independent audit firm of its management of the failed deal. That will cost more money but it has become a perception battle, with Oberholzer in particular being tried by media.

So far none of the available evidence suggests any nefarious or negligent activity by the CEO, but the independent review should reveal more.

“The Executive Council met to discuss stakeholder concerns raised by certain media reports around technicalities relating to the transaction,” a Saru statement read.

“The reports related to the proposed investment by the ASG Group into the commercial rights of SA Rugby. The proposal failed to meet the 75% threshold it required to receive approval of the General Council in December.

“The recent questioning related to the establishment of a company, Win by One (Pty) Ltd in SA, and the sub-division of the fee that would have been payable to the international brokers who worked on the deal.

“The independent review will be focused on both elements.” DM

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