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Author Topic: Premiership Rugby to go private?  (Read 1151 times)

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Fearless Fred

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Re: Premiership Rugby to go private?
« Reply #30 on: Thursday 06-Sep-2018, 09:05* »
Looks like it's going to be rejected:

From the Telegraph
Quote
Premiership Rugby are expected to reject a £275 million bid for a major share in England’s top league from a private equity firm – although two other finance-raising options are understood to be under strong consideration, Telegraph Sport can reveal.

Private equity firm CVC Capital Partners, who bought a 70 per cent stake in Formula One in 2006 for about £1.3 billion and last year sold it to Liberty Media for around £6.2 billion, have made an offer to secure a 50 per cent holding in English club rugby’s elite tournament.

The deal, regarded in some quarters as a potential game-changer for the club game, will be considered by owners at a board meeting on Tuesday.

However, the organisation’s rules state that such a financial investment requires unanimous agreement from clubs and it is understood that several believe CVC’s offer undervalues the tournament, despite combined losses of around £28.5 million last year.

Premiership Rugby has seen its turnover rise dramatically to £70 million this season, a rise of 88 per cent in five years and those opposed to the offer believe that it does not reflect the potential growth of the league.


Premiership regulations also state that no entity is allowed more than 25 per cent shareholding, which is currently split between 13 clubs although the clubs would have the right to alter that if unanimity is reached.

However, it seems that the CVC’s valuation of the league at £550 million has left some club owners underwhelmed while others have expressed concerns with giving an outside body a major say in the sport’s affairs.

“Given the rise of the revenue over the last five years, the offer of £275 million is not enough,” said one senior club source. “Selling 50 per cent or more of the league might give us a short-term windfall, but it would result in lower central revenues going forward unless the investor is able to increase them significantly.”

Caution expressed over the CVC offer could make two other options that will be presented to club owners on Tuesday more attractive.

It is understood that clubs will also consider an offer of smaller financial investment for a minority shareholding as well as an option to effectively take out a “mortgage” on future league revenues, giving the clubs a much-needed short-term cash injection.

Any new investment is likely to see the majority of clubs insist that it does not result in a hike in the salary cap and demand instead that the money is used to invest in facilities to grow the domestic game.

Saracens are currently looking for an investment for a £30 million for a new stand at Allianz Park while Harlequins, Bath and Newcastle are also planning to upgrade their stadiums.

The prospect of an outside investor seeking to increase the commercial value of club rugby also raised fears of fresh aggravation with the Rugby Football Union over the release of top players to England, with the potential that clubs would demand more money from the governing body.

The RFU declined to comment beyond saying that it would monitor developments, although one senior source claimed that a deal would require approval in a special general meeting.

“What will happen to academies and player development if profit is the motive,” said the source. “How can the RFU inject huge amount of funding into a company who will be looking for a 9.25 per cent annual return on investment?”

The clubs, however, moved to reassure those fears by insisting that any new investor would respect the current eight-year £225 million deal signed with the RFU in 2016, which secures greater access to England players and offers financial incentives for clubs to field English-qualified players.

Eddie Jones, the England head coach, refused to be drawn on the potential impact of a new investment in the club game, saying only that access was already at a minimum.

“We can’t get them [players] any less,” said Jones. “If we get them any less, we won’t see them at all. If you look at Australia, New Zealand and South Africa at the start of the Rugby Championship they got a four-week camp. If they want to give them to us any less then I’ll be out of a job. I might be out of a job anyway!”

Another senior source reflected concerns about the impact that outside investors would have on English rugby as a whole. “There is a real danger of the clubs getting blinded by money,” said the source.

Tom Gladstone, director of consulting at sports marketing firm Synergy, said he expected CVC to secure a TV deal in America if their deal was accepted.

“I wouldn’t have said it has Premier League or F1 level of potential, but there is clearly a realisation that there has been under-commercialisation,” he told Telegraph Sport.


“From a central revenue point of view, the biggest potential is clearly on the TV broadcast deal.

“With BT and Channel 5 deals coming up in 2021, the TV deals will be foremost in their minds.

“The natural rugby playing nations are potential new markets, but America, with Gallagher [as Premiership sponsor] coming in, will be a big strategic push.

“I can’t imagine the salary cap will be moved. I think there will be close controls on where the new money is spent. It will need to be invested in infrastructure and marketing to grow the game.”


olipool

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Re: Premiership Rugby to go private?
« Reply #31 on: Thursday 06-Sep-2018, 09:09* »
TomBuckQuin well done for avoiding the knee jerk reaction of "They want to make money so it must be bad".

But my concerns with CVC's proposal are:

1.  If they take over 51% of the business, they presumably get 51% of the profit. So in return for £20m ish per club, the clubs are handing over half of their future dividend income from PRL. 

You would hope that thje clubs invest the £20m and grow things so that they can replace that lost future income.  But based on past  history, what's the chance they all just spank it?   So effetively by taking the money now, are they mortgaging their future?

2. CVC aren't a charity so will be putting in £275 with the aim of getting more than that back. I don't know what they did in F1 but it sounds from others here as though they made it lots more expensive.  Which would be a shame.

OP


Monte

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Re: Premiership Rugby to go private?
« Reply #32 on: Thursday 06-Sep-2018, 09:59* »
Owners will clear all or some of their debt with this cash, although we have always been assured that Charles Jillings and Duncan Saville were not about to recall their debt. However the bond last year was trying to do just that.

GP2110

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Re: Premiership Rugby to go private?
« Reply #33 on: Thursday 06-Sep-2018, 10:02* »
Oliool - Yes - if they took 50%, they would get 50% of the profits. But, at present, as noted in the Tory article, there were combined losses of around £28.5 million last year.  That is not new. For the last few years, there has been no profit to share.

Moreover, everyone seems to be of a view that CVC would only be interested if they saw a good return. So 50% of a good return is better than a 100% of a debt, which is growing and which is causing the clubs to be in financial turnover.

As regards the previous discussion re: Sky, they would only get rights if they outbid BT.  Either way, the more revenue from tv rights, the better for the clubs financially.
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Quinten Poulsen

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Re: Premiership Rugby to go private?
« Reply #34 on: Thursday 06-Sep-2018, 10:11* »
Quote
However, it seems that the CVC’s valuation of the league at £550 million has left some club owners underwhelmed

This is a bit bizarre.

olipool

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Re: Premiership Rugby to go private?
« Reply #35 on: Thursday 06-Sep-2018, 10:45* »
Oliool - Yes - if they took 50%, they would get 50% of the profits. But, at present, as noted in the Tory article, there were combined losses of around £28.5 million last year.  That is not new. For the last few years, there has been no profit to share.

I don't think that's quite right.   The clubs as a whole are making a £28.5m loss.  But PRL (which is the thing they are thinking of selling) is profitable.  It pays dividends to the clubs (i.e. it hands them their on 13th share of the TV rights etc).

So by doing this they would be handing over something which is currently of value to them.

OP

deadlyfrom5yardsout

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Re: Premiership Rugby to go private?
« Reply #36 on: Thursday 06-Sep-2018, 11:01* »
Interesting thread with some intelligent contributions, thanks.

From my point of view, the minute it becomes too costly to travel and watch the games I will happily become an armchair fan utilising RugbyPass/ BT/Sky/Premiership TV or whoever and maybe attend key games of my choice. I will still very much be a Quins fan but able to afford a couple more Chambermaids.

GP2110

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Re: Premiership Rugby to go private?
« Reply #37 on: Thursday 06-Sep-2018, 11:27* »
Oli - But PRL is (as far as I understand) 100% owned by the 12 Premiership clubs + Irish. 

So even if PRL is profitable, those profits go straight to the clubs and the dividends are reflected in the clubs 'figures.  The fact that all of the clubs are making losses, means that the dividends are plainly not sufficient at present. 

Alternatively, PRL is very profitable - but the clubs have chosen not to draw the profits (in which case their losses are artificial). That would make no sense to me.


A222Quin

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Re: Premiership Rugby to go private?
« Reply #38 on: Thursday 06-Sep-2018, 11:35* »
Yeah, if this happens I'm out and will probably head off to watch the lower leagues.

Why?

At the moment I feel that Premiership clubs are treading a fine line between commercialism and running an accessible sport that is still firmly rooted in the community and supplying players to the England team. My concern is that if CVC get involved then the links with all of those will be put under severe strain in the search of profit. We'll end up with a situation much like football or current F1.

I appreciate I'm being cynical but I just don't want to watch a sport that is a commercial entity's play thing much beyond the level it already is.   

olipool

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Re: Premiership Rugby to go private?
« Reply #39 on: Thursday 06-Sep-2018, 11:56* »
Oli - But PRL is (as far as I understand) 100% owned by the 12 Premiership clubs + Irish. 

So even if PRL is profitable, those profits go straight to the clubs and the dividends are reflected in the clubs 'figures.  The fact that all of the clubs are making losses, means that the dividends are plainly not sufficient at present. 

Alternatively, PRL is very profitable - but the clubs have chosen not to draw the profits (in which case their losses are artificial). That would make no sense to me.

What you say is right.  Today they draw the profits and still make a loss overall.   The concern is that they sell half of PRL, only get half the profit in future, and so make a larger loss - unless the money paid by the buyer is well invested, to grow the overall profit of PRL by more than double.

Which comes back to the original point of - will the clubs spend that "jam today" money well, or will they just spank it...?  I know which one I suspect.

Grins

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Re: Premiership Rugby to go private?
« Reply #40 on: Thursday 06-Sep-2018, 13:46* »
It's an interesting debate. 

I fail to see what CVC bring to the table apart from expensive cash.  If the clubs wanted a cash injection (albeit it might be smaller, I'm sure they could borrow against the TV income stream).  This would be significantly cheaper than CVCs money.  I doubt CVC will really add significant value to the sport.  The team in CVC are money guys (of which the PRL has access to plenty).  If they have a bench of potential managers / advisers who are that much better than the current team PRL can go and hire them anyway.

Grins

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Re: Premiership Rugby to go private?
« Reply #41 on: Thursday 06-Sep-2018, 13:49* »
Surely they can only sell if there is a willing buyer and the willing buyer would then take control.

I see very little downside.

Surely that depends who the willing buyer is?  For example would you like to see half of PRL controlled by an oligarch?  The Glazers?  Stan Kronke? etc

The clubs should think very, very carefully before conceding control of their largest revenue stream.

Only Joe Quin

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Re: Premiership Rugby to go private?
« Reply #42 on: Thursday 06-Sep-2018, 14:01* »
I find this figure of £28.5m loss by the clubs quite misleading. When the money the sugar dadies put in is treated as investment and club balance sheets show big loans due to them, this is nonsense, they are just trying to fool us (or more likely the taxman). In reality they must know that very little of this money will ever be repaid to them. In economic reality this is income to the clubs.
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RodneyRegis

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Re: Premiership Rugby to go private?
« Reply #43 on: Friday 07-Sep-2018, 14:07* »
The taxman? I don't think you understand how tax works. How could it possibly be reported as income? It will be a very dark day when investment proceeds are treated as taxable income, whether they be capital or loans. Don't give them ideas.
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