Rugby: New Zealand Rugby and Silver Lake agree to deal

The All Blacks perform the haka ahead of a test in Wales. Photosport

After almost two years of talks, a deal has finally been approved for multi-billion-dollar American investment firm Silver Lake to invest in New Zealand Rugby.

The New Zealand Rugby (NZR) Board and the New Zealand Rugby Players Association (NZRPA) Board today announced that they have approved a partnership agreement between Silver Lake, NZR and the NZRPA.

The partnership will provide "capital to invest in the game at all levels and supporting the development of new capabilities and the pursuit of new global opportunities enabled by digital technologies," a statement said.

"This partnership marks the beginning of a transformational phase for the entire game in New Zealand and will allow us to pursue exciting new opportunities for rugby," the statement said.

Under the terms of the agreement, which remains subject to ratification by the Provincial Unions and Māori Rugby Board, Silver Lake will invest NZ$200 million in a new commercial entity that will house all revenue-generating assets of NZR, with additional co-investment of up to NZ$100 million to be offered to New Zealand-based institutional investors later in 2022.

The deal is significantly reshaped from Silver Lake's original $465m offer for a 15 per cent share, but at a higher valuation. It comes after a year of painstaking negotiations – and costly mediation – between NZ Rugby and the Players' Association that featured an ugly public fallout last year.

Silver Lake, NZR and NZRPA will also establish "Global Rugby Opportunities" to invest together in rugby-related businesses outside of New Zealand.

In summary, the partnership agreement comprises the following components subject to necessary approvals:

- Establishes NZR CommercialCo under the control of NZR that will contain all the revenue-generating activities of NZR.

- Silver Lake invests NZD $200 million into NZR CommercialCo at an NZD $3.5 billion valuation in the form of a perpetual convertible security at a low interest rate, which can convert into ordinary equity after three years.

- Later in 2022, an additional co-investment will be offered to New Zealand-based institutional investors so that domestic capital can have the opportunity to also participate in the investment. A minimum of NZD $62.5 million will be offered, with the potential to seek up to NZD $100 million if parties agree. Silver Lake will underwrite this institutional syndication if it is not fully subscribed.

- At the conclusion of the additional co-investment, Silver Lake will own between 5.71-8.58% of NZR CommercialCo (representing NZD $200-300 million investment, depending on capital needs and the uptake of New Zealand-based institutional investors) vs. the 10-15% stake that had been previously proposed.

- An increase in valuation compared with the prior proposal driven by the improved future financial outlook from broadcasting and sponsorship, resulting in NZR raising a substantial amount of money whilst selling a smaller share of the entity, allowing NZR to fund all its investment needs and putting the game on a sound financial footing for the future.

- Silver Lake, NZR and NZRPA will through "Global Rugby Opportunities" (GRO) together invest in global rugby and rugby-related technology businesses, earning NZR and NZRPA a 15% share of the profits of GRO (split 50/50) in return for their contribution of sports expertise, know-how and relationships.

Under this partnership, the protections and controls for NZR remain in place as previously agreed. Silver Lake would be a minority investor and NZR will retain full control over rugby as well as the commercial strategy. The new NZR CommercialCo entity board will be controlled by NZR and will comprise a new independent chair, and other independent directors, to assure high governance standards and at the same time business acumen to make NZR CommercialCo a success for everyone interested in rugby in New Zealand. The NZRPA will have a seat on the NZR CommercialCo board.

Separately and subject to ratification, NZR and NZRPA have agreed terms for a new collective agreement which continues the current revenue sharing arrangement and governs the new relationship between NZR, the players, and NZR CommercialCo. Further, NZR will undertake an independent review of its governance structures and processes to ensure it is fit-for-purpose for this new chapter. NZRPA will also be reviewing its constitution and governance structures in 2022 as part of a strategic and business planning process it is undertaking.