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Author Topic: Premiership Rugby to go private?  (Read 1147 times)

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Fearless Fred

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Premiership Rugby to go private?
« on: Wednesday 05-Sep-2018, 07:12 »
There's an article in today's Times that says that PRL are exploring the possibility of being bought by a private equity firm:

Quote

The Premiership is in talks over whether to agree a game-changing, historic deal for rugby by selling controlling ownership of the league to a private equity firm for about 275 million.

The deal is regarded by insiders as potentially the biggest step-change in club rugby since the game went professional 23 years ago, and is being compared to when footballs Premier League was formed in 1992.

The executive committee of Premier Rugby Ltd (PRL) has been in negotiations for about a year with CVC Capital Partners, the private equity company based in Luxembourg which made about 8 billion from its decade-long ownership of Formula One.

PRL is owned by 13 member clubs: the 12 sides in the Premiership and London Irish. The 13 club owners will have a special meeting on Tuesday when the executive committee will present the deal with CVC.

It is unlikely that a deal will be agreed and signed immediately but the meeting could give the green light for the completion of the deal. Club sources indicated yesterday that their valuation of the Premiership is higher than CVCs offer. It is understood that, if the CVC deal is not approved, PRL has other equivalent investment to consider from outside of private equity.


The RFU cannot stop the deal and thus prevent a new, outside influence from becoming one of the key stakeholders in English rugby. The RFU can veto new owners of the individual clubs, although it has no right of veto to ownership of its league.

The concern for English rugby is whether CVC will flex its muscle regarding its key assets. There is already a contest between club and country for control and ownership of the England players. If the deal with CVC were to go through, it would only be in the following years that any disagreement over how much time the players would be released for British & Irish Lions tours, for instance, or extra England camps, would be apparent.

It is understood that CVC would want to be a quiet partner within the game. However, it will be ruthless on commercial rights. It should be expected that it would drive a harder bargain with the RFU over the cost of player release for international windows.

The clubs have struggled in recent seasons to make the business of rugby work; collectively they lose about 30 million a year, on average 2.3 million each. It is hard to see many of them rejecting a windfall that would deliver about 17 million overnight to every club. The clubs could wipe out almost all of their debt. They see the deal as an opportunity to invest by building new stands and facilities.

Recent tranches of income received by the clubs, mainly from the sales of television rights, have gone largely to the players, which served to inflate player wages. However, there is an understanding among the PRL owners that the CVC money would not go the same way; the deal will not instigate another sharp rise of the salary cap.

The majority of the clubs are understood to be in favour of the deal. The significant opponent is believed to be Bath, who are controlled by the most influential of the owners, Bruce Craig.

CVC, it is understood, regards the Premiership to have been severely undercommercialised in the past decade. CVCs model with F1 was based largely on selling TV rights globally. This is a pool in which PRL has only dipped its toes. CVC shares a strong relationship with Sky, the broadcaster of F1, who is likely to return to the negotiating table for TV rights of club rugby.

There will be concern, too, for CVCs exit strategy. It will only be interested in leaving with a large return on its investment, as it did with F1 in January last year. Another potential problem for the clubs is that when CVC sells on its 51 per cent controlling stake, they could find themselves under any ownership. The Times understands that the fine-tuning of the terms for exit from the deal have yet to be completed, though first rights may go to the 13 clubs.

The deal could provide a significant windfall for English rugby, but there is huge potential for an escalation of the antipathy between clubs and the RFU.

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Blucherquin

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Re: Premiership Rugby to go private?
« Reply #1 on: Wednesday 05-Sep-2018, 07:31 »
Blimey

Massively enticing for the clubs and potentially great for the sport in the medium term - while at the same time almost guaranteeing total commercial exploitation and its potential death when CVC cash in.


PJM

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Re: Premiership Rugby to go private?
« Reply #2 on: Wednesday 05-Sep-2018, 09:13 »
It does seem interesting. Of course we will then end up like football where the clubs are dictating the international appearances and can veto them, which perhaps as the main wage payers is how it should always be.

Boonie

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Re: Premiership Rugby to go private?
« Reply #3 on: Wednesday 05-Sep-2018, 10:28 »
Commercialism is, sadly, the lifeblood of most sports these days. In and of itself, it is not automatically bad, but the exit strategy is the one that stands out for me.

If it costs CVC to buy, they will want a return. A 17m windfall per club will allow huge investment, but if the price at the end of the term is 20m or 25m per club, how many could possibly stump that up? And if not, and PRL gets sold to someone else, then who? Under what terms?

We all want club rugby to succeed; it's where we invest our time, money and passion. To a greater or lesser extent, we want National teams and Lions to thrive as well. The issue is whether this is a short term gain with a long term hangover.

We live in interesting times...

A222Quin

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Re: Premiership Rugby to go private?
« Reply #4 on: Wednesday 05-Sep-2018, 10:47 »
Yeah, if this happens I'm out and will probably head off to watch the lower leagues.

Camquin

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Re: Premiership Rugby to go private?
« Reply #5 on: Wednesday 05-Sep-2018, 11:26 »
CVC are not a charity, they are buying the commercial rights for a purpose - presumably because they think they can get more out of the TV than Premiership Rugby does now.
But that increase goes to CVC not to the clubs.

How much per year will the clubs get after the initial 17m?
Anything? Nothing?

deadlyfrom5yardsout

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Re: Premiership Rugby to go private?
« Reply #6 on: Wednesday 05-Sep-2018, 12:09 »
Its worked pretty well in Formula 1 but then I guess you have wealthy manufacturers subbing the teams a little.

BedfordshireBoy

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Re: Premiership Rugby to go private?
« Reply #7 on: Wednesday 05-Sep-2018, 13:01 »
Far from convinced that this is good thing for the game in the longer term.
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Grins

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Re: Premiership Rugby to go private?
« Reply #8 on: Wednesday 05-Sep-2018, 13:14 »
CVC are not a charity, they are buying the commercial rights for a purpose - presumably because they think they can get more out of the TV than Premiership Rugby does now.
But that increase goes to CVC not to the clubs.

How much per year will the clubs get after the initial 17m?
Anything? Nothing?

CVC would buy 51% of the shares via a new share issue.  The clubs would share in any dividends paid out of Premiership rugby.  Whether there are any would depend on how the deal is structured in terms of the debt and equity structure.

CVC will look for value by improving the commerical performance of PRL and also likely by trying to get a better deal with the RFU.  This is a small deal for CVC (certainly their main fund) so they must think they can generate large returns out of it.  There is, of course, the ego boost to the deal partners that comes from owning this type of asset.

Rocker

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Re: Premiership Rugby to go private?
« Reply #9 on: Wednesday 05-Sep-2018, 13:17 »
I think this would be a big mistake. The clubs I'm afraid are losing money because tehir business model isn't working. This won't help the underlying issue, it is merley a tempoirary sticking plaster to cover current cashflow issues. It will be to the detriment of the clubs in the longterm imho.
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Grins

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Re: Premiership Rugby to go private?
« Reply #10 on: Wednesday 05-Sep-2018, 14:51 »
I agree with you Rocker.  However a 17m injection per club could allow investment to help turn the losses around - new stand etc.  Better than trying to fleece the fans with dodgy bonds.

I'm not surprised Bruce Craig is against it, only that more owners aren't.  Is 17m really worth selling control of your destiny for?

TomBuckQuin

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Re: Premiership Rugby to go private?
« Reply #11 on: Wednesday 05-Sep-2018, 14:56 »
I'm no economist - in fact, I'm a total layman when it comes to this stuff. But surely if the clubs are pretty much all (with the exception of 1 or 2) leaking money year on year then any kind of injection of funding and someone else carrying the debts and losses has got to be a good thing/saving grace? No? Can someone break down - in very simple terms - why this is a bad idea? Not even being trite - I'm a freelance video editor by trade, I don't even know what I'm doing with my own money most of the time!

Grins

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Re: Premiership Rugby to go private?
« Reply #12 on: Wednesday 05-Sep-2018, 17:18 »
I'm no economist - in fact, I'm a total layman when it comes to this stuff. But surely if the clubs are pretty much all (with the exception of 1 or 2) leaking money year on year then any kind of injection of funding and someone else carrying the debts and losses has got to be a good thing/saving grace? No? Can someone break down - in very simple terms - why this is a bad idea? Not even being trite - I'm a freelance video editor by trade, I don't even know what I'm doing with my own money most of the time!

You get the money today, which is good, but the price of that money is a loss of control over the business going forward - CVC would be in charge.  Depending on the circumstances of the various club owners, they may be willing to do this to get cash now vs reduced future income.

Now if CVC grow the revenue hugely in a way that PRL couldn't have alone, that all might be a price worth paying but CVC are a bunch of financial guys and it is unlikely they will add much beyond changing the management of PRL or bringing in advisers / consultants to help.  PRL could arguably do it themselves. 

The real problem comes at the end when CVC want to sell (their fund has a limited life so they have to sell and the staff make their money out of the share of realised profits so are motivated to sell).  Who takes control then?

GP2110

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Re: Premiership Rugby to go private?
« Reply #13 on: Wednesday 05-Sep-2018, 17:39 »
Surely they can only sell if there is a willing buyer and the willing buyer would then take control.

I see very little downside.

TomBuckQuin

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Re: Premiership Rugby to go private?
« Reply #14 on: Wednesday 05-Sep-2018, 18:31 »
Surely they can only sell if there is a willing buyer and the willing buyer would then take control.

I see very little downside.

This is what I was thinking. Again, I don't pretend to know any of the intricacies surrounding these types of business deals but surely handing over the commercial and fiscal risk and responsibility to a third party and making it their problem is only ever a good thing? And what, realistically, are these corporates going to do to negatively affect the experience us fans pay to be part of? If they try anything too drastic that the fans don't like, those fans won't be so inclined to turn up - so if they want to make a success of the competition commercially it's in their interests not to have a negative affect on the rugby side of things. At least not to an extent that I, or other fans like me who just want to watch a good game of rugby, will mind about.

But if someone can warn me of something I'm not seeing/understanding (which, as mentioned, is eminently probable) then I'd always prefer to be prepared for disappointment/outrage.
« Last Edit: Wednesday 05-Sep-2018, 18:33 by TomBuckQuin »

 

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