The ongoing saga over the South African Rugby Union’s (SARU) quest to ecure a deal with an equity partner has taken another twist with the news that the governing body now reportedly want to abandon plans to find an investor.
This, after SARU began searching for a private equity investor in 2018 and came close to clinching a deal with the US-based consortium the Ackerley Sports Group (ASG) last December.
However, ASG’s initial offer was rejected by the majority of South Africa’s provincial unions. For the proposal to be approved a 75% majority had to be achieved in the vote in which 13 member unions took part. As it turned out seven of the unions in question opposed the deal.
The fallout caused by the ASG saga now seems to have SARU questioning whether this is the right route to follow.
SARU’s executive committee (EC) held a meeting on Saturday and according to Sunday newspaper Rapport, the matter of whether to continue searching for an equity partner, or not, was one of the main discussion points.
Meanwhile, it also appears that two more business giants are interested in becoming involved in one of the consortiums that are keen to present an alternative proposal for an equity transaction to SARU.
African Rainbow Capital representatives Patrice Motsepe and Johan van Zyl are now reportedly looking to join forces with a group of franchise union shareholders, such as billionaire Johann Rupert, Marco Masotti and Johan le Roux.
Rupert and Motsepe already work together as shareholders of the Bulls.
On Thursday, SARU are set to report back to its union presidents and chief executives at a meeting of its executive council in Johannesburg on what the EC feels is the way forward regarding an equity transaction.
‘ASG agreement has caused major divisions’
“The ASG agreement has caused major divisions in South African rugby,” a source told Rapport.
“It’s a case of you and me again. It’s something South African rugby has worked hard to get rid of. If there is an alternative funding model, it may not be necessary for an equity transaction.”
Among the questions the EC had to answer on Saturday before deciding whether an equity transaction was still the best option was whether SARU would have enough money to award the provincial unions the gold funding model, and not the bronze.
According to Netwerk24, after the ASG proposal was shot down, provincial unions will now receive millions of rands less from SARU.
A rugby boss admitted to not being surprised that SARU’s EC is having second thoughts about following the route of an equity partner.
“They are looking for a reason not to investigate the ASG commission,” he said.
There are still plenty of questions over the commission that would be paid for the ASG proposal. Initially, SARU said the percentage payable to the third party Jordan Associates was 15%, but the company later backtracked and said it only expected 2.5% to 3%.
SARU later explained that it had budgeted for 15% on all transaction fees.
“If the investigation (by Ernst & Young into SARU’s handling of the ASG case) does not answer all the questions, the noise about the commission will never stop – and relations will never be able to be repaired,” said an unnamed rugby boss, who also wants SARU to show the failed deal’s contracts to the provincial union’ presidents.
SARU are also expected to provide feedback to its executive board on Thursday about the other equity deal proposals, which the governing body has received.
Apart from the consortium which consists of the South African franchises, another consortium, led by Altvest Capital, are also interested in becoming SARU’s equity partner.
Altvest’s chief executive, Warren Wheatley revealed that his consortium sent a follow-up email to SARU last week, but have not yet received a response.
“We are still very interested in pursuing a supporter-player ownership model for SA Rugby,” he told Rapport.
“We are unable to submit an official offer as we would like to have access to more details to make a binding offer.
“We hope that SARU will allow an open and transparent bidding process, assessed by experts. We are also open to working with other interested parties to make the dream of supporter-player ownership a reality.”
Motsepe and Van Zyl’s entry must be taken into account
Meanwhile, SARU must take into account the entry of Motsepe and Van Zyl. They initially expressed interest in becoming part of the ASG consortium, which would operate SARU’s commercial rights, before the SARU executive board voted against it in December.
“Patrice and Johan definitely want to invest money in South African rugby,” a rugby boss told Rapport. “However, it is still far too early to speculate about a new local consortium.
“SARU will first need to provide a process for how it would look at a new potential equity transaction.
“The final composition of the local consortium may depend, among other things, on the amount of money that SARU require and what percentage share is obtained for it.”
This local consortium, which has had several discussions among itself, according to Rapport, has already officially indicated their interest in an equity partnership with SARU.
“It’s a very strong local consortium. It’s good for South African rugby, although I don’t know if SaRU is that excited about it,” a rugby boss told Rapport.
“All I know is that the franchises have an offer ready.”
READ MORE: Unexpected development from US-based company in SA Rugby’s private equity deal saga – report
Src: Planetrugby.com - https://www.planetrugby.com/news/sa-rugby-contemplating-u-turn-on-private-equity-deal-report
