Towards the end of last year the South African Rugby Union (SARU) resolved to reject a proposal to accept a potential private equity investment in SA Rugby’s commercial rights.

The proposal failed to reach the 75 percent majority required for such a transaction to be approved, with seven of the 13 member unions with voting rights opposing the proposal.

The Ackerley Sports Group – which was identified by the members as the preferred bidder in December 2023 – had an exclusivity period until the end of 2024 to make a revised offer, and it’s believed this was exercised.

There have been competing offers from a local group headed by billionaire South African businessman Johann Rupert, but nothing definitive has emerged.

Meanwhile, on Friday, it a report by Media24, it was questioned why SARU CEO Rian Oberholzer was the sole director of a company with the same name as the failed equity bid

This comes after Irish businessman Eddie Jordan denied he ever charged SARU a 15% transaction fee – as claimed by Oberholzer – with the figure apparently closer to around 3%.

A governance review by an independent audit firm has now been commissioned by SA Rugby to assure stakeholders that governance requirements were adhered to in relation to a proposed equity transaction.

The Executive Council of SA Rugby met on Friday to discuss stakeholder concerns raised by certain media reports around technicalities relating to the transaction.

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.

SA Rugby sought to clarify the following:

For clarity, media are advised of the reasons for the creation of Win by One (Pty) Ltd:

  • The implementation steps of the transaction, should it have been approved, would include the setup of commercial entity owned by both shareholders. As part of preparation, SARU setup the Special Purpose Vehicle (SPV), named Win by One, which was 100% owned by SARU as per standard commercial practice.
  • The equity partner would acquire its shareholding from the SPV.
  • The SPV would be a South African tax-registered company that could immediately perform all the functions required of the planned new company. This structure was advised at all steps of the process with all stakeholders, including in media advisories.
  • For convenience’s sake that entity was called Win by One (Pty) Ltd. The Win by One LLP company established by ASG is a separate entity in an international jurisdiction in which SARU has no interest.  
  • The creation of the SPV a purely technical process and was performed by BDO for SA Rugby 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.
  • Such entities require the naming of at least one director until the Board of the new company would have been constituted. As the accounting officer of SA Rugby, the CEO was automatically named as the sole director of the new company as is business custom and practice.

The establishment of the amount of the transactional costs and the sub-division of the fee is explained as follows:

  • Provision was made for a maximum of 15% costs towards the equity transaction.
  • Of which an estimate of a maximum of 5% was identified to cover the transactional fees for lawyers, mergers and acquisitions specialists, audit and tax advisers among others.
  • The company that comprised the agents and associates who introduced SARU to the transaction presented the commission structure to SARU.
  • It included an agreement reached with the brokers for a success fee of 10% should the deal go through.
  • The success fee was renegotiated to 8% with the brokers before it was presented to the General Council.
  • The division of the fee among the parties in the event of success was at their discretion.
  • The agreement and fees went through all the necessary approvals and governance structures according to SA Rugby’s policies.
  • As the proposal was not approved no fees have been paid to the brokers.
  • The professional fees incurred by SA Rugby are to be carried by SA Rugby.

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Src: TheSouthAfrican.com - https://rugga.co.za/sa-rugby/sa-rugby-sanction-review-over-controversial-equity-deal/