New Zealand Rugby has received a $465 million offer from US technology investment giants Silver Lake for a 15 per cent share of commercial rights valued at $3.1 billion, the Herald can reveal.
The deal, should it be signed off by New Zealand Rugby's provincial unions in the coming months, would be the biggest seachange since the game turned professional 25 years ago, and the largest transaction of this nature in NZ sports history.
New Zealand Rugby and Silver Lake have been in talks for over nine months, with the Herald first revealing their shared interests last May.
While Silver Lake's minority stake remains under negotiation and could be anywhere from 10 to 15 per cent, with terms yet to be finalised, the Herald understands they have tabled a $465 million offer for 15 per cent of a new, separate NZ Rugby entity.
The deal is conditional on acceptance from the majority of the provincial unions, with a decision not expected before NZ Rugby's annual general meeting in April. Provincial union and Super Rugby bosses canvassed by the Herald cautiously welcomed the move, but selling a stake in the national game is expected to evoke polarising reactions.
On Wednesday afternoon, NZ Rugby executives began a series of three-hour roadshow pitches to the provincial unions, starting in Dunedin, to outline the landmark offer and explain how the game-changing funds would be distributed.
The NZ Rugby Players' Association, as well as former All Blacks players, coaches and Black Ferns are also being courted as part of the nationwide consultation period.
NZ Rugby's plans involve setting up a new subsidiary company, dubbed CommercialCo, which will be responsible for maximising commercial rights, including broadcast, sponsorship, merchandising and growing future revenue streams such as streaming, Esports and global coaching clinics.
Silver Lake's $465m offer is to purchase a 15 per cent stake in this entity which has been valued at $3.1 billion by the private equity giants who have a history of long-term growth investments in the likes of global mix martial arts phenomenon UFC, Madison Square Garden Company, which owns blue chip NBA franchise the New York Knicks and the NHL's New York Rangers, and City Football Group, whose flagship team is Manchester City.
Silver Lake has US$75 billion (NZ$104b) in assets, while its portfolio generates more than $180b revenue annually.
NZ Rugby's commercial rights valuation compares favourably on a global scale, with the LA Lakers valued at US$4.4b (NZ $6.1b) and Manchester United, the world's third most valuable football brand, worth US$3.8b (NZ $5.3b).
Senior NZ Rugby executives spoken to by the Herald stressed the All Blacks, nor any other teams, were being sold and described the deal as an "incredible offer" that reflects the appeal of New Zealand's 130-year rugby legacy.
NZ Rugby's pitch to the provincial unions details the benefits the cash influx will have on all levels of the game, particularly in propping up the under-resourced grassroots, while outlining the need to manage expectations, form a war chest and be disciplined with future spending.
The Herald understands Silver Lake's investment would be paid in three tranches over three successive years to help ensure it is carefully managed.
Plans for the funds include immediate and significant investment into the provincial unions; shoring up NZ Rugby's cash reserves that took a $40m hit due to the reduction of All Blacks tests and Covid-19 shutdown last year, future proofing the community and women's game through the creation of a legacy fund, initiatives to tackle the sharp decline in teenage participation rates and covering ongoing costs of CommercialCo.
The funds will also assist in the ongoing fight to retain players, who through the Players' Association have an agreement that ringfences 36.5 per cent of NZ Rugby's annual revenue.
NZ Rugby executives believe they have addressed concerns around losing control by ensuring the CommercialCo board will comprise five NZR members, two Silver Lake representatives and an independent chair.
Future commercial rights profits will be split along the proposed 85/15 shareholding lines.
In going to market NZ Rugby engaged several private equity companies, including CVC Capital Partners and Bruin Sports Capital, in a competitive bidding process run by investment bank Jefferies. NZ Rugby executives told the Herald Silver Lake's offer was compelling on multiple fronts.
Aside from the monetary value, Silver Lake's technology expertise, having a base in Silicon Valley, access to global networks and track record breaking into emerging markets were major lures in attempting to leverage the All Blacks' reach.
NZ Rugby executives suggest Silver Lake do not adopt a smash-and-grab mentality but, rather, intend to form a decade-long partnership, though acknowledge risks are involved when the firm wants to exit in time.
Appetite for investment in rugby has reached fever pitch in the past year as equity firms scrap for shares in a sport they believe is undervalued and underexposed on a global scale.
With CVC Capital Partners buying stakes in England's Premiership Rugby, the Pro14 and Six Nations competitions, it was only a matter of time before NZ Rugby struck a similar arrangement.
In recent years NZ Rugby realised its financial model, as costs continued to exceeded revenue, was unstainable. The national body recognised this model, which relied on the All Blacks funding all levels of the game and 12-yearly British and Irish Lions tours, bailing out balance sheets had to change.
When Covid-19 hit last year NZ Rugby was forced to strip widespread costs from the business, laying off 40 staff to leave a leaner operation.
Compared to rest of the rugby world New Zealand is now considered to have a relatively stable financial position. It still faces significant losses, but vastly improved from the initially forecasted 70 per cent decline in revenue.
Should the investment deal proceed as planned, Silver Lake's capital injection promises to immediately supercharge New Zealand rugby's financial landscape but the risk and reward trade-offs will only be clear in time.