New Zealand Rugby has engaged in talks with a multi-billion-dollar American investment firm about taking a stake in the struggling sport.
In what could prove a landmark moment in the game's long and storied history, NZ Rugby have been wooing private-equity giants Silver Lake with the prospect of adding New Zealand rugby to a sports portfolio that includes global cash machine the UFC.
Although they remain some way from a deal, it has been described as a seachange attitude for an organisation steeped in tradition and natural conservatism.
In a reshaped rugby world, the attraction for investors would be the prospect of a club world championship — the principal reason key stakeholders have recently taken to unsubtly referring to Super Rugby franchises as "clubs" — and the broadcasting and commercial revenue that would spin off that.
As rugby lurches forward without clear post-pandemic direction, the Herald understands NZR's leaders were so concerned about the game's broken revenue model they held high-level talks with at least two private-equity firms; equity that could potentially give them the leverage to break free from World Rugby's stranglehold.
One was Luxembourg-based CVC Capital Partners, which already has a significant stake in Northern Hemisphere rugby, but more intriguing are the talks with technology specialists Silver Lake.
The firm has offices in New York, Silicon Valley, London and Hong Kong and manages US$40 billion (NZ$60b) in assets, while its portfolio generates more than $200b revenue annually. It established its reputation as a major player with lucrative investments in internet phone provider Skype and chip maker Broadcom.
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More recently, it diversified into the sports and entertainment sector, including global mixed martial arts phenomenon the 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 defending English Premier League champions Manchester City.
Silver Lake managing director and managing partner Mike Bingle has estimated personal wealth of $1.2b, according to Forbes magazine.
While the potential for significant investment is being extolled among some of NZR's biggest stakeholders — multiple insiders confirmed NZR had engaged Silver Lake — a source at the national body cautioned against "getting too far ahead", saying everything was on hold during the coronavirus response and adding they were "miles" from signing a deal.
The source emphasised that any injection of private equity did not equate to the selling of the All Blacks, or even NZ Rugby Incorporated.
"You would set up a subsidiary company of NZ Rugby and get investment into that company in some form of partnership," the source said. "You put commercial assets into that company — whether that's in combination with Sanzaar partners and something like Super Rugby in its reincarnated form, or the Rugby Championship."
Hopes for a rapid reset of rugby's ecosystem were dealt a blow, however, with the re-election of Bill Beaumont as World Rugby chairman; a move seen as more suited to entrenching the status quo than the promotion of upstart Argentine challenger Agustin Pichot.
It is also a result some insiders believe could set NZR on a separate course from World Rugby, particularly if issues such as revenue sharing are not swiftly addressed.
Despite protestations the All Blacks are not for sale, it would be the height of naivety to suggest any fund investing in New Zealand rugby would not have their eyes on that prize. Despite their on-field primacy looking more tenuous than it has for more than a decade, the All Blacks remain the most valuable brand in the sport — estimated at close to $300m, as opposed to second-most valuable England at around $250m — and the biggest drawcard in the sport.
"Our financial model at this stage is the All Blacks provide everything — 100 per cent of the profit and we then farm it out to keep the players that then flows throughout the rest of the game," the source said. "We're totally dependent on them remaining, as they have been, at the top of the world for 100 years. If that was to change, it would have a substantial impact on NZ Rugby, so we've got to get revenue streams and we can't afford to fund those ourselves."
The search for alternative revenue streams comes at a time when NZR is working through redundancies that will affect half their workforce after the loss of $7.4m in 2019 was exacerbated by the pandemic.
With broadcast and commercial revenue projected to drop 70 per cent this season, about $120m, those losses are expected to swell to eight-figure losses next year. All Blacks shirt sponsor AIG has also cut ties with the organisation, although there is said to be no shortage of suitors for that sponsorship real estate.
The desire to find funding confirms at the highest levels of the sport there is a concession the competition structures, which aside from the odd tweak have remained in place since rugby turned professional in 1995, are no longer fit for purpose.
"We need a completely brand-new model," one high-level source said of the situation where the Super Rugby franchises required a bailout and the provincial unions were financial dead weights.
"NZ Rugby making multimillion-dollar losses [that are] covered every 12 years by the Lions ... it's gone, we have to change it completely.
"Certainly at the Super Rugby level, our financial model there is under huge pressure, both the competition and our teams. We're grossly under-capitalised. That's a critical area."
The source indicated NZR would resume talks in earnest with Silver Lake, and others, once it had a firm blueprint for a reincarnated Super Rugby.
The five franchises — the Blues, Chiefs, Crusaders, Highlanders and Hurricanes — have instigated a review, Aratipu, that is likely to see a short-term contraction of Super Rugby to a domestic or transtasman competition. But any hopes Australia might be involved initially have been dampened.
It is understood Rugby Australia has also been in talks with private equity firms but its financial situation, which has it confronting a $120m revenue deficit, is increasingly imperilled.
Add to that this week's ugly fallout from Raelene Castle's resignation as chief executive, which involved Rugby Australia board member Peter Wiggs quitting after an explosive email exchange with interim chair Paul McLean, and RA's shambolic state only appears to be worsening.
"Can the professional game in the short term survive over there?" asked an NZR source. "Will they actually have enough money to pay for the Reds, Waratahs, Brumbies and Rebels? How are they going to pay the Wallabies?
"Are they going to have to return to Manly versus Randwick club rugby and have their best players playing overseas?
"It's really difficult to look at Australia with multi-million losses and figure out how they're going to get out of that hole.
"I think we have to ignore Australia because it's too much of a variable."
The source confirmed that along with Silver Lake, NZR had been in talks with at least two European-based equity firms, including CVC.
CVC, which owned Formula One from 2006 to 2017 and turned a reported £3.5b profit during that time, was finalising a deal for a 14 per cent stake in the Six Nations and a £120m ($246m) stake in the cross-border European Pro14 as coronavirus started its inexorable spread across the globe.
Those plans have stalled, although there have been recent suggestions the money could still be on the table when rugby returns to television screens.
In 2018, CVC took a 27 per cent holding in English club rugby's Premiership.
The Luxembourg-based outfit is also in talks to take a stake in Italy's premier football league, Serie A.
It is, however, worth noting CVC's ruthless pursuit of profits caused much unrest within F1, with then deputy team principal of Force India Bob Fernley accusing it of "raping the sport".
Silver Lake did not respond to Herald inquiries about the possible moves by NZ Rugby.