Mediation between New Zealand Rugby and its leading players will begin this week in an attempt to try to align the two parties on the best future financial path for the professional game.
The process, which will be managed by leading QC Mike Heron, is the first step towards the players using their collective bargaining process to try to rescope the proposed $465m deal tabled by private equity group Silver Lake Partners to buy a 15 per cent stake in the commercial rights of NZR.
New Zealand Rugby Players' Association have been vehemently opposed to the Silver Lake deal from the outset, arguing that the proposal is flawed on multiple levels, not the least of which is that it is a needlessly expensive means to borrow capital when there are significantly cheaper alternatives such as Long-Term Environmental, Social and Governance Bonds (ESG).
The NZRPA has also expressed concerns that the current deal sees Silver Lake share revenue but not be accountable for any of the costs of running the game, that there is no business plan detailing precisely how the new investor plans to achieve its aggressive revenue growth targets and uncertainty about the US firm's exit strategy.
They say there is little detail in the current proposal about what should happen if Silver Lake fails to meet its minimum growth targets – which would ultimately leave NZR with an 85 per cent share of its own reduced revenue.
While Silver Lake continues to garner positive media coverage for the roles it has played in other entities such as Manchester City and the UFC, it has not yet exited any sports operation in which it has invested.
One further concern for the NZRPA is that the provincial unions are being financially incentivised to vote in favour of the deal – with six-figure immediate sweeteners to be paid if it goes through and further million dollar windfalls to follow.
NZR, however, has used investment bank Jeffries to explore an exhaustive range of alternative ways to raise capital and is adamant a deal with Silver Lake is the best and perhaps only viable option to secure a sound, long-term financial footing for the game.
The national body also commissioned PWC to conduct an independent valuation of the Silver Lake deal and the consultancy firm has concluded that it would be in the best interests of the provincial unions and all the game's stakeholders to back it.
The national body believes it needs a minimum $300m equity injection to fund a range of growth initiatives such as increased merchandising sales, an OTT broadcast platform and potentially the creation of an E-sports entity.
It argues that without owning any assets as such and mainstream institutions currently reluctant to let companies borrow against future earnings, private equity is its only means to raising the necessary capital.
But after months of consultation and discussion, NZR and NZRPA remain polarised in their views about the best way forward and hence mediation will begin on Wednesday with the topic of private equity top of the agenda.
The need for both parties to reach some kind of compromised agreement is intense as NZR has formally acknowledged in writing that it accepts that the proposed deal with Silver Lake Partners can only be made if it has the approval of the players through the NZRPA.
Failure to win the NZRPA's consent would scupper any deal as the players are fundamental to and indistinguishable from the commercial rights that Silver Lake Partners is hoping to buy.
NZRPA are not opposed to NZR raising capital and looking for innovative ways to grow revenue – but say they can't and won't agree to the current proposal.
NZR is willing to explore means by which it can appease the players and keep them on side, but isn't willing to compromise the deal to the extent it can no longer provide the required quantum shift in revenue.