An alternative offer to Silver Lake, valuing New Zealand Rugby at a colossal $3.8 billion, has been tabled by local investment manager Forsyth Barr.
The Auckland head-quartered company has conducted due diligence on the prospect of NZR selling a five per cent stake in its future commercial revenues through an NZX listing and believes investor demand could potentially raise as much as $650m.
Under the terms of the Forsyth proposal – conducted at the request of the New Zealand Rugby Players' Association which is not supportive of selling a stake in the national game to US fund manager Silver Lake - NZR would be able to raise between $170m and $190m, with as much as 40 per cent of the offering being open to mum and dad investors who could buy in for as little as $100.
Forsyth managing director Neil Paviour-Smith says that his firm are willing to underwrite the deal as a number of significant fund management houses and high net worth New Zealanders have already indicated they would make significant investments.
Such a deal would, therefore, be deemed low risk and value NZR at between $3.4bn and $3.8bn, which is 12 per cent to 23 per cent higher than the valuation offered by Silver Lake.
The Silver Lake deal, for which NZR has received the backing of provincial unions to proceed, will raise $387.5m and see the US group take 12.5 per cent of net revenue.
The NZRPA have been strongly opposed to the deal, with its president, former All Black captain David Kirk, also chairman of Forsyth Barr.
"This is what we do day in day out," says Paviour-Smith in answer to whether his firm's assessment of the likely investment demand is credible.
"We assess all sorts of different opportunities and first and foremost we obtain a sense of client demand. We have already had conversations with Kiwi Saver managers and other institutional investors. We think there will be wide public appeal."
The Forsyth presentation document possessed by the Herald, entitled NZ Inc, states that the gross proceeds of a five per cent Initial Public Offer would allow NZR to: "Distribute $39m to the provinces and the New Zealand Maori Board as per the Silver Lake proposal.
"Make a capital contribution to CommercialCo of $50m as per the Silver Lake proposal.
"Result in NZR reserves of between $136m and $154m, significantly more than their reserves policy target (40 per cent of their cost base) and pre Covid-19 reserve levels."
The Forsyth proposal has been sent to NZR by the NZRPA with a memo requesting it be seriously considered and discussed as a viable and better alternative to the Silver Lake bid.
In response, NZR chief executive Mark Robinson said he was "shocked and disappointed" by the NZRPA's decision to share the proposal with the media "before sharing it with New Zealand Rugby".
The memo sent by NZRPA to NZR also states: "We don't need to make a risky sale of 12.5 per cent of New Zealand Rugby's revenue stream forever to secure and grow the game.
"There is undoubtedly access to capabilities to help rugby grow the game, including from New Zealanders who continue to demonstrate there is the technological capability amongst us to grow on a global scale (for example, Xero, Zuru, Rocket Labs, Allbirds, etc).
"But first we need a plan. That is what we should all be working on together."
NZRPA acknowledges that the NZ Inc plan, while valuing NZR at a higher amount than Silver Lake, will not immediately generate the same excess capital to sit in what is being called a Legacy Fund.
Under the Silver Lake proposal, there will be sufficient spare cash reserves generated that NZR will ring fence for community game investment.
"We accept that under the NZ Inc IPO NZR is unlikely to set up a Legacy Fund immediately," NZRPA states in its letter.
"However rather than relying on interest income from a Legacy Fund to benefit the community game, NZR retains an additional 7.5 per cent of revenue.
"As revenue is projected to grow faster than investment income (8 per cent versus 6 per cent), retaining more revenue is significantly more valuable to NZR and the community game than additional investment income.
"Over time, and given starting reserves of $136-$154m, NZR will be able to establish a Legacy Fund. In addition, by selling 5 per cent to New Zealand investors via a public offer instead of 12.5 per cent to Silver Lake, NZR will retain far greater control over its future, more flexibility and optionality, as well as sharing its future results with New Zealanders who wish to invest in the business."