Author Topic: Premiership: CVC 'likely' to take minority stake (Read 929 times)

Jedzi · « **on:** Wednesday 28-Nov-2018, 08:44* »

It looks like the deal discussed in a couple of threads in September is back on, albeit in a different form. This time, CVC will take a minority stake in return for a cash injection. The Guardian seems to think this time it will go through:

Premiership clubs likely to agree £240m sale of stake to former F1 owner CVC

Paul Rees - Tue 27 Nov 2018 17.45 GMT

Premiership club owners are likely to vote for a proposal to give a minority stake to the private equity firm CVC in return for more than £200m, two months after they turned down a takeover bid.

CVC, which held a majority stake in Formula One between 2006 and 2017, came back with a new offer that would mean it ran the commercial arm of the Premiership but not the league itself. This would keep the agreement within World Rugby’s regulation governing ownership and mean the 12 clubs enjoyed a greater proportion of profits than under the original bid.

Premiership Rugby has held talks with CVC in recent weeks and it is understood a firm offer will be tabled at the next board meeting, which is to be attended by the clubs’ owners, on 11 December. The 12 would each receive an immediate cash injection of around £20m at a time when only Exeter are in profit.

The debts of most clubs have grown in recent years, largely because of wage inflation which has accounted for most of the growth in turnover. CVC’s money will not go into the pockets of players because the salary cap is pegged for the next two seasons but will be used to improve infrastructure and pay off debt.

Bath are hoping to redevelop the Recreation Ground, Harlequins are planning a new stand and Leicester hope to start a £22m project next summer to build a hotel and a car park alongside their Welford Road stadium. Contracts have been exchanged with a developer and the project hinges on planning permission.

While some owners have reservations about bringing in an external partner which would take out a significant chunk of the Premiership’s profit each year, others argue investment is needed if clubs are to achieve their goal of sustainability.

This season Northampton posted another loss and earlier this month Wasps announced their pre-tax loss had more than doubled to £9.7m, with the club’s debt rising to £56m. The bottom line is that if every owner demanded the money owed to them be immediately repaid there would be no Premiership; the Rugby Football Union is in no position to help after losing £30m last year.

A question the owners have to weigh up is whether the cash injection would leave them worse off in the long term. They have to balance the money they would receive from CVC against the reduction from central funds each year –the money which is generated from television and sponsorship deals for the league. How long would it take to make up the £20m?

CVC believes the tournament has undervalued itself and that the TV market in particular has been underexplored. The Premiership’s current deal with BT runs until the end of the 2020-21 season while it is in its first year with the title sponsor, Gallagher.

The expectation is that CVC will tap into social media and try to engage the likes of Amazon and a greater share of young viewers, but it did not do that with F1 which next year starts a £600m, six-year deal with Sky. Critics of that agreement accused CVC of taking far more out of the sport than it put in.

The clubs would continue to run the rugby side as well as policies like the rugby cap. CVC would not be able to influence the agreement Premiership Rugby has with the RFU over the management of elite players and it would not be given a position on the professional game board.

One club official admitted giving CVC a stake would be a gamble, one that would not be taken without close scrutiny of what it would mean for clubs in the medium and long term. He said: “It is clearly attractive in the short term because it would provide money immediately for projects or to reduce debt, but the devil will be in the detail.”

Fearless Fred · « **Reply #1 on:** Wednesday 28-Nov-2018, 10:24* »

CVC will only buy a stake in PRL if they think they can get revenue from selling the broadcasting rights and sponsorship. That could be by selling the rights overseas, but it could also be looking at the broadcast rights here in the UK. Personally I hope it stays with BT as they at the moment offer the best coverage of Rugby on a Pay TV channel. I'd hate it to go to Sky, and online services like Amazon, YouTube, etc have yet to prove themselves capable of covering Live Sport properly (there were a lot of complaints after the US Open tennis when Amazon coverage didn't work as promised this summer).

Brown Bottle · « **Reply #2 on:** Wednesday 28-Nov-2018, 13:49* »

Quote

CVC believes the tournament has undervalued itself and that the TV market in particular has been underexplored.

Interesting considering, as far as I remember, that BT were considered to have bid over the top, as they did with all their sports acquisitions, because they were after a bigger share of the broadband market. I also heard that this had not gone down well with the shareholders.

never sleep · « **Reply #3 on:** Wednesday 28-Nov-2018, 14:40* »

A number of years ago, the Top 14 in France signed a deal for TV rights equating to £76 million per year. In comparison the premiership at the time was £38 million.

https://www.dailymail.co.uk/sport/rugbyunion/article-3588240/Top-14-clubs-sign-new-mammoth-388-million-broadcast-deal-gap-widens-Premiership-Pro12.html

deadlyfrom5yardsout · « **Reply #4 on:** Thursday 29-Nov-2018, 09:11* »

I never understand why the target in these deals even contemplates accepting an offer like this. Surely PRL just need to headhunt a few key people and do the job of maximising revenue themselves?

£20m ain't gonna help us build a new stadium or help Saints with £56m debts....

Chipstead Quin · « **Reply #5 on:** Thursday 29-Nov-2018, 11:01* »

Quote from: deadlyfrom5yardsout on Thursday 29-Nov-2018, 09:11*

I never understand why the target in these deals even contemplates accepting an offer like this. Surely PRL just need to headhunt a few key people and do the job of maximising revenue themselves?

£20m ain't gonna help us build a new stadium or help Saints with £56m debts....

I agree deadly , but can also see how 12 owners , each with their own agenda wouldn't even be able to decide who the key people were responsible to ... bit like running a Rugby Club by Committee .. doesn't always run smooth !

Gone · « **Reply #6 on:** Thursday 29-Nov-2018, 11:03* »

Quote from: deadlyfrom5yardsout on Thursday 29-Nov-2018, 09:11*

I never understand why the target in these deals even contemplates accepting an offer like this. Surely PRL just need to headhunt a few key people and do the job of maximising revenue themselves?

£20m ain't gonna help us build a new stadium or help Saints with £56m debts....

Scale - PRL can’t turn itself into a private equity firm.

However the involvement of CVC will almost certainly result in the slow death of the sport.

Ludicrous short sighted snatching of cash. It won’t make a difference.

CVC never invested in F1 and they screwed every last ounce of cash from tv deals and promotion.

Everything will cost more but CVC will do nothing other than reap the profit from leveraged broadcast rights.

The actual game and grass roots, clubs as we understand them mean nothing to CVC. They are here because they think it’s not making enough cash from rights and promotion deals.

They will do the deals - and take the profits - it’ll end up being like WWE wrestling.

Happy Thursday.

A222Quin · « **Reply #7 on:** Thursday 29-Nov-2018, 12:04* »

As I said before - if this sort of thing happens I'm off to watch the lower leagues.

Samquin · « **Reply #8 on:** Thursday 29-Nov-2018, 12:49* »

Interesting the original article mentions Quins are looking at developing a new stand. No mention of the proposed new stadium.

toast · « **Reply #9 on:** Thursday 29-Nov-2018, 12:56* »

Blucher, not totally true - but yes they did expect their investment to appreciate, which it certainly did!

Where hands off and basically left it all to Mr E et al...….

Chipstead Quin · « **Reply #10 on:** Thursday 29-Nov-2018, 14:09* »

Im not sure I quite understand how a minority shareholder negociating the Broadcast rights affects so badly what happens on the pitch as far as the Prem teams are concerned?

Surely it is to the mutual benefit of all for that to be of the highest standard .

I appreciate that less money will come back to the Clubs long term than could possibly be available , but there will still be extra funds for each prem Club now and if each owner is happy with it surely that's a good thing, the alternative is that the owners get restless and start pulling cash out ?

I may well be missing a blindingly obvious point so happy to be corrected.

Gone · « **Reply #11 on:** Thursday 29-Nov-2018, 14:42* »

Quote from: toast on Thursday 29-Nov-2018, 12:56*

Blucher, not totally true - but yes they did expect their investment to appreciate, which it certainly did!

Where hands off and basically left it all to Mr E et al...….

Well yes except leaving him in post was entirely the strategy because he milked every last cent out of everything.

There's a big difference between hands off and screwing something for its market potential.

Gone · « **Reply #12 on:** Thursday 29-Nov-2018, 14:44* »

Quote from: Chipstead Quin on Thursday 29-Nov-2018, 14:09*

Im not sure I quite understand how a minority shareholder negociating the Broadcast rights affects so badly what happens on the pitch as far as the Prem teams are concerned?

Surely it is to the mutual benefit of all for that to be of the highest standard .

I appreciate that less money will come back to the Clubs long term than could possibly be available , but there will still be extra funds for each prem Club now and if each owner is happy with it surely that's a good thing, the alternative is that the owners get restless and start pulling cash out ?

I may well be missing a blindingly obvious point so happy to be corrected.

There's cash now. There's no cash in the future. Spend 20m now, then it's gone.
There's TV money. But less TV money will go the clubs, and less and less in the future.
It's up to the clubs to make up the shortfall.

It's a private equity firm that exists to exploit resources for maximum return. The capital outlay is a short term gain, but nothing more.

I could be wrong. But it would mean CVC operating in a way that it hasn't up to this point in time.

Chipstead Quin · « **Reply #13 on:** Thursday 29-Nov-2018, 15:32* »

Thanks Bq , that's fair enough and if it pans out that way , I can see how it might be a problem .

I was thinking they were taking some equity that was indicated as a minority stake , the profits would be distributed in a similar equity ( maybe naïve in that supposition ) and they are banking on the fact that their share of Broadcast revenue would be greater than their investment. ie they are buying into a potential cashcow .

No doubt PRL will get less long term , but I fear a few Clubs don't have a 'long term ' without investment now which would be more damaging to our game .

I just don't see why they would undertake strategy that would damage the product they hope to cash in from .

As it says in the article ' the devil is in the detail '

Gone · « **Reply #14 on:** Thursday 29-Nov-2018, 15:40* »

Quote from: Chipstead Quin on Thursday 29-Nov-2018, 15:32*

Thanks Bq , that's fair enough and if it pans out that way , I can see how it might be a problem .

I was thinking they were taking some equity that was indicated as a minority stake , the profits would be distributed in a similar equity ( maybe naïve in that supposition ) and they are banking on the fact that their share of Broadcast revenue would be greater than their investment. ie they are buying into a potential cashcow .

No doubt PRL will get less long term , but I fear a few Clubs don't have a 'long term ' without investment now which would be more damaging to our game .

I just don't see why they would undertake strategy that would damage the product they hope to cash in from .

At that point they would aim to cash out. It wouldn't damage the product in their terms, but we may not like what's happened to rugby in the mean time.

As I understand it, F1 fans think they very nearly destroyed the sport.

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Author Topic: Premiership: CVC 'likely' to take minority stake (Read 929 times)

Jedzi

Premiership: CVC 'likely' to take minority stake

Fearless Fred

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never sleep

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deadlyfrom5yardsout

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