The Business of Sport: investors join the rugby ruck and maul

LONDON – Rugby’s crown jewels are proving attractive to investors looking to tap the untapped potential of the market as struggling governing bodies attempt to replenish their coffers.

US private equity firm Silver Lake is said to offer around US $ 340 million (S $ 457.5 million) for a 15% stake in New Zealand Rugby (NZR) trading rights and negotiate deals on goods and transportation. worldwide distribution.

The focus of the deal is the All Blacks – the ultimate brand in sports. The three-time world champions are recognized worldwide for their style of play and their famous pre-match haka challenge.

In the northern hemisphere, CVC Capital Partners – which previously held a controlling stake in Formula 1 – last month acquired 14.5% of the commercial rights to Six Nations for £ 365million (S $ 679.2million). ).

CVC is expected to increase its investments through better broadcast deals. In the UK, Six Nations are still shown on free-to-air television rather than a pay service.

Sea change seen

Phelan Hill, senior consultant at Nielsen Sports, said the corporate battle for premium rugby rights was “alive” and that a deal with the All Blacks could change the dynamics of rugby in the southern hemisphere.

Silver Lake already owns a 10 percent stake in City Football Group, which owns Premier League giants Manchester City.

“What will be most interesting is how Silver Lake’s investment in NZ Rugby aligns with Sanzaar, the governing body of rugby in the southern hemisphere,” said Hill.

“The financial model of Super Rugby is under enormous pressure – both the competition and its individual teams – due to Covid-19 and they need to close the income gap.”

He also believes that rugby could be a tempting option for American investors. He said English Premiership clubs could be an attractive low-cost choice over American sportswear, which “is reaching a tipping point in terms of price, the average franchise value in the National Football League (NFL). ) exceeding $ 3 billion “.

American investors have already crowded into English football with major investments in Premier League clubs Liverpool, Manchester United, Leeds and Fulham.

James Paul, portfolio manager at Blackstar Capital, said if investors turned their attention to rugby the nature of the involvement would be different from football as the sport is much less mature as a brand.

While an investor acquiring a Premier League club would consider merchandising and revenue streams on a more micro level, he believes the goal of rugby is to gain greater reach locally and globally.

This growth margin makes rugby an attractive proposition. For cash-strapped NZR, a deal would be “transformative,” said chief executive Mark Robinson.

But the senior All Blacks have raised concerns over the proposal’s potential impact on rugby in the country and threatened to block “the largest transaction of this nature in New Zealand sporting history.” reported the New Zealand Herald.

Provincial rugby unions are due to vote on the deal at the NZR board meeting this month.

New York Times global sports reporter Tariq Panja told the SportsPro podcast that governing bodies and sports properties can expect some backlash in investment deals, especially from fans, who view these deals. organizations as social enterprises rather than commercial properties that should be sold at the highest level. tenderer.

Still, the interest in private equity is “unprecedented”, he said.