Saru’s new funding deal: Unlocking more sponsorship income puts equity sale on ice

The “Rainbow” consortium, backed by the owners of the Bulls, Stormers and Sharks, proposed an alternative deal to the Ackerley Sports Group (ASG) offer of $75-million for a 20% stake, which failed last year.

By Craig Ray

11 Feb 2025

The unions are guaranteed Saru’s top funding model after a new proposal to raise funds was accepted.

The South African Rugby Union (Saru) revealed a new funding model to its members last week that has paused an equity buyout from local investors succeeding in the short term.

The “Rainbow” Consortium, backed by the owners of the Bulls, Stormers and Sharks, proposed an alternative deal to the Ackerley Sports Group (ASG) offer of $75-million for a 20% stake that failed last year.

The local hopefuls sent a letter to Saru on 4 February 2025 outlining their plans. It was a confident letter that revealed they felt they were in a position of power in the dynamic after the Ackerley deal failed to gain the 75% majority at a vote last December.

Surprisingly, the detail the Rainbow Consortium outlined, barring the paying of a “finders” fee, looked remarkably similar to the Ackerley deal to which they objected last year.

Mark Alexander, the president of Saru. (Photo: Ashley Vlotman / Gallo Images)

But at a General Council meeting on 6 February, Saru’s hierarchy surprised the gathering by proposing a new “gold” funding model that utilises existing sponsors by unlocking more funding from their long-term supporters.

In phase one, a major sponsor has agreed to purchase licensing agreements to run a series of fan parks locally and even globally.

The sponsor will run these businesses under licence and commercialise them to make a return on their investment.

In phase two of the proposal, more sponsors will come on board to further monetise e-commerce and data-mining opportunities.

According to several insiders, the amount of money the sponsors have agreed to pay runs into hundreds of millions for the first phase, with hundreds millions more available for the second phase.

And it all comes with little risk to Saru as these are not loans or equity sales, but increased income from sponsors.

Gold versus bronze

At the General Council meeting last December, at which the unions voted whether or not to accept the Ackerley deal, Saru emphasised that without some sort of extra funding the unions would have to live with the “bronze” funding model.

The difference is about R80-million annually between gold and bronze.

It was at this juncture that the Rainbow group pushed forward with its equity model.

Some smaller unions viewed the haste and enthusiasm with which the Rainbow Consortium wanted to buy into Saru as opportunistic.

When Rainbow sent their expression of interest, and it looked almost identical to the Ackerley deal, there was unhappiness and even concern from some smaller unions.

A Bok fan celebrates after the team won the Rugby World Cup 2023 final against New Zealand. (Photo: EPA-EFE/YOAN VALAT)

Fans watch the Rugby World Cup 2023 final. (Photo: EPA-EFE/YOAN VALAT)

They offered “no less than” $75-million for a 20% stake in a newly formed commercial rights company. As far as operating and distributing funds, the Rainbow deal acknowledged it would be similar to Ackerley.

“We understand that during the ASG transaction process, considerable time and effort was spent negotiating an investment structure and distribution waterfall to suit the commercial, operational and financial requirements of Saru and its member unions, while providing an attractive potential return for that investor group,” Rainbow’s 4 February letter to Saru stated.

“We envisage that our offer would potentially adopt a similar structure and distribution waterfall, however we would refine and amend this based on a further evaluation of the opportunity and in discussion with Saru and/or its independent transaction adviser.”

Like ASG, the Rainbow proposal also stated it would initially invest $37.5-million, with the “balance to be funded in accordance with an agreed schedule, subject to Saru’s anticipated funding needs, over a maximum of three years”.

Conflict of interest?

Through all this, the overriding question of the conflict of interest of three of South Africa’s big unions effectively “owning” the other 12, was always in the background.

The idea that three major unions and their investors would operate in the best interests of all South African rugby provinces needed more interrogation.

Saru’s mandate is to govern all rugby diligently, and with the sport’s and its members’ best interests at the forefront.

Obviously, at a club level, the best interests of the Sharks, Bulls and Stormers come first for the owners of those clubs. If they become the equity partners and dominate a new commercial rights company board it could create a problematic dynamic for the rest of the South African rugby ecosystem.

Springbok rugby fans in a pub in Johannesburg, South Africa, watch the World Cup final. (Photo: EPA-EFE/KIM LUDBROOK)

Would they put the interests of other, lesser unions on a par with theirs?

Rainbow Consortium even stated in its letter that it was willing to provide “bridging finance” to Saru to ensure that the “gold” model was retained.

With no other way of reaching the “gold” funding model, there was an expectation that the General Council was set to vote to proceed with the Rainbow Consortium offer on 6 February.

However, Saru president Mark Alexander surprised the gathering when he revealed the alternative offer of increased sponsorship money, which enabled Saru to offer and guarantee a “gold” funding plan until 2027.

As one smaller union representative member put it, they might not have liked the Rainbow Consortium offer, but they would have had no choice but to accept it.

Seemingly, out of nowhere though, there was a viable and attractive alternative, which the unions jumped at, and for the next two years it appears put a private equity sale on hold.

Equity sale still possible

Despite these latest developments in an ongoing saga, the idea of an equity sale is not over.

What the fan park licensing sale has done though, is given Saru and its members time to take a step back and appoint an independent financial institution to review the financial state of the entire rugby ecosystem.

This review process could take anywhere between nine and 12 months. But it’s a process the Rainbow Consortium proposed and Saru accepted — the only sticking point being who does the review.

Rainbow suggested a banking institution to which it had close links. Saru rejected that and will seek a fully independent institution to carry out the process.

“We have been given a new mandate from the General Council to start a new process to review our commercial and financial prospects and define the process,” Alexander said.

He added that to provide full confidence in the process, the financial advisors would be chosen through an independent selection process. One representative each from the franchise unions and non-franchise unions as well as two independent members of the Executive Council would form the selection committee, supported by the Saru CEO and CFO.

“We will take a measured and consultative approach under the guidance of the financial advisers as we review the financial challenges and opportunities,” said Alexander. DM

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South Africa

Gold versus bronze

Conflict of interest?

Equity sale still possible