Restructure will allow NSWRU to sell stake in Waratahs - if it wants

Restructure will allow NSWRU to sell stake in Waratahs - if it wants

BRAD WALTER

January 7, 2010
WITH the ink on the ownership agreement for Australia's first privately run Super rugby franchise in Melbourne barely dry, officials have revealed that the NSW Waratahs have taken steps that will allow them to follow suit if they wish.

The ARU yesterday put an end to months of speculation about the ownership of the new team by handing control to the Melbourne Rebels consortium, led by multi-millionaire businessman, philanthropist and one-time director of the Big Banana Harold Mitchell. This will now begin the task of securing coaching staff and players for the 2011 season.

The Rebels are expected to do so without the same level of funding as the $4.1 million annual grant Australia's four existing franchises each receive, but that is unlikely to discourage further privatisation and ARU boss John O'Neill predicted that other teams would seek some form of private equity investment in the near future.

While saying he was not yet looking to do so, Waratahs chief executive Jim L'Estrange told the Herald that the NSWRU was positioning itself so it could sell a stake in the Super franchise by splitting the professional and community aspects of the game.

Under a new governance model finalised just before Christmas, the NSWRU has transferred its Super rugby licence to a new company known as NSW Waratahs Ltd, which is a ''separate and distinct controlling body charged with the sole responsibility of administering all aspects of professional rugby in NSW''.

A separate board comprising L'Estrange, NSWRU chairman Edwin Zemancheff, his predecessor, Arvid Petersen, broadcaster Sally Loane, businessmen Russell Tate and players' representative Al Baxter, was established and will have its first meeting next month. At this meeting the inaugural chairman of NSW Waratahs Ltd will be appointed.

L'Estrange will continue to sit on the board of the NSWRU, whose main focus will be grassroots rugby, which is expected to receive some funding from NSW Waratahs Ltd.

''By effectively splitting into two divisions, we've created a model that will allow us to consider taking on private equity at some stage in the future,'' L'Estrange said.

''There is nothing on the horizon at the moment but it is something that has been discussed in the past and this gives us the flexibility to be able to consider [it] at the appropriate time if we want to do that.''

It is understood the QRU is considering a similar model whereby the Reds would be established as a separate company. The QRU has appointed a working party to look at the issue of full or partial privatisation.

With rugby facing stiff competition from AFL, rugby league and football, ARU officials are keen to attract more money into the game through private ownership.

''We made a strategic decision nearly two years ago that rugby needed private equity on a nationally controlled regulated basis and nothing that has happened in the last two years has changed my mind,'' O'Neill said.

''I think that you will see private equity or private ownership come into the other franchises. No one is pushing it, but I think Melbourne has led the way and I suspect that others will follow in the fullness of time.

''It is a very significant landmark in terms of Australian rugby's competitive position, vis-a-vis the other football codes, particularly AFL, NRL and football.

''I think if we resisted the introduction of private ownership, the game would be significantly diminished and, over time, we would lose our competitive edge.''




http://www.smh.com.au/rugby-union/un...0105-lsee.html

i think this is probably a good thing, loosen the grips of the old dinosaurs on how the game is run

I still maintain it should be all in or all out however, so long as we don't end up with the NH Club v Country scenario at the selection table then it is probably an acceptable inevitability I guess.
For me, the ultimate is a representative team playing for your "local" pride to have to support through thick and thin, not just a set of colours to affiliate with during the stronger recruiting cycles.
Somewhere between those two extremes is an achievable reality.

its probaly inevitable that at some stage we will have a club vs country type scenario going on with increased private equity in the game. Its only natural that the owners of the clubs are going to be looking out for there best interest, but IMO its a small sacrafice to pay for the potential dividends that private equity can provide.

But surely the primary dividend is the betterment of your national side, at least as far as the ARU having any involvement at all?
Certainly acknowledge that private equity owners need to look after #1, it's more that the ARU need to go in with their eyes wide open and looking ten years down the track, laying strong "ground rules" as to how the structure will work and looking to the NH to ensure they don't replicate the faults in that system.

I have about $15 - thats about what the Tahs are worth

Quote:

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Originally Posted by Burgs

But surely the primary dividend is the betterment of your national side, at least as far as the ARU having any involvement at all?
Certainly acknowledge that private equity owners need to look after #1, it's more that the ARU need to go in with their eyes wide open and looking ten years down the track, laying strong "ground rules" as to how the structure will work and looking to the NH to ensure they don't replicate the faults in that system.

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definetly the national side should be the priority.. what im saying is that its inevitable that at some point the interest of the ARU and the franchise owners is going to conflict. We shouldnt act surprised because its one of the cons of bringing private equity into the game, however i still think the pro's outweigh the cons.

NSWRU could choose to sell its stake. At the moment Waratahs Inc pay a licence fee to them. Which is actually a pretty good set up. Tahs Inc can be run as a commercial venture and the NSWRU can focus solely on the development on Rugby in NSw, something they have neglected for a long while now.

This separation has been mooted for some years in NSW and it's good to see that it has happened.

We need not worry too much about the England situation and the conflict of the RFU with the GP clubs.

The question does not arise at the moment: the Super14 finishes in good time before the inbound tests in June and most often Wallabies are available too early for training because the aren't playing in the finals. Unfortunately.

Moreover, the England clubs are the principal employers of their players, whereas here the Super franchises pay their Wallabies what amounts to a basic wage. The major portion of a Wallaby's salary cake is from the topping provided by the ARU. This has nothing to do with the Super franchises. Nor are they involved in the payment of cream from 3rd parties to a few stars they have, though they are usually involved in sourcing them.

And, as Giteau found out: if the 3rd parties don't cough up, the franchises aren't responsible.

Thus the ARU has a stronger position with Oz players than the RFU has with England players.

But the rugby landscape could change. Super rugby or any successor to it could bring about a conflict with the national rugby interest. If the ARU is smart, and they are not always, they should require that any private rugby entity given a licence to operate a professional rugby team in Oz should have in its Articles that they must act at all times with the approval of the ARU.

So long as SANZAR holds together the ARU could enforce this. They are one of the joint venture partners and it is SANZAR that organises the competitions and negotiates with broadcasters.

There could be a take over of the sport by a circus type organisation paying top dollar as happened to our rugby league cousins and nearly happened at the start of professional rugby, but that would require a tri-nations takeover.

I don't think the ARU will have to worry about that any more.

So who goes broke from now on? Waratahs Inc or NSWRU?

You make good points Lee however, the two key sentences you used are the ones that worry me and I just hope that the ARU are looking far enough down the track to avoid laying an unsustainable or unviable groundwork that railroads them at a later date.

"The question does not arise at the moment...
But the rugby landscape could change."

Quote:

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Originally Posted by Lee Grant

But the rugby landscape could change. Super rugby or any successor to it could bring about a conflict with the national rugby interest. If the ARU is smart, and they are not always, they should require that any private rugby entity given a licence to operate a professional rugby team in Oz should have in its Articles that they must act at all times with the approval of the ARU.

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im sorry but thats bullshit, no investor in there right mind would invest in something that they have very little say in...

Just look at the current situation with the NRL, the clubs are effectively taking control over the direction of the competition. On top of that, why should a organisation agree with the ARU if its not in there best interest, they should be allowed to voice there dissaproval, and who says any future ideas the ARU come up with is right for the game either.

Lee, the power which the ARU holds and this is the proper and intelligent way of doing it is the licensing idea, the rebels have been granted a license and if they dont meet the said criteria of that license then they will lose the right. I dont know the exact details of the contract drawn up but you can imagine that it would include details whipch pretty much have the franchise on the same page as the current provinces.

Technically the ARU could revoke the license and therefore hold the power, however it still gives the new franchises there own power to voice there opinion.

You said:

Quote:

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Originally Posted by TOCC

the rebels have been granted a license and if they dont meet the said criteria of that license then they will lose the right. I dont know the exact details of the contract drawn up but you can imagine that it would include details whipch pretty much have the franchise on the same page as the current provinces.

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I said: they should require that any private rugby entity given a licence to operate a professional rugby team in Oz should have in its Articles that they must act at all times with the approval of the ARU.


There's not a lot of difference there. The main thing is that a private entity such as the Mitchell group in Melbourne or one that may take over the Tahs separate Super entity down the track, and so on, should not be able to do stuff that is inimical to the national rugby purpose - as reckoned by the ARU.


The (England) RFU didn't think it through at the start of the pro era. The amateurs in charge of the RFU made the rules up as they went along and were trumped by businessmen wiser in the ways of the commercial world.

I think we are both pointing out that the ARU can't let a private enterprise take over professional rugby teams and run roughshod over the national rugby interest as the rugby landscape evolves. Obviously I expressed myself poorly.

The trick is to find investors or consortia of them who are after a large rugby dividend but not necessarily a large cash dividend. This is going to be extremely difficult but not impossible. The ARU have a great duty of care not to let the animals run the zoo.

As with any contract, it is all about the detail and the ARU will have little power to revoke a license for anything other than specific contractual breaches. Anything not specifically addressed by the contract will be a point of interpretation, negotiation and potential litigation unless there is some sort of clause saying that, for anything not covered, what the ARU says goes. As TOCC says, such clauses would generally raise big red flags for any prospective investor so one can only hope that they have specifically addressed all possible aspects of unilaterally expanding the competition, negotiating future television deals, adjusting funding amounts, accessing players for all the various international duties, blocking signings if necessary, forcing player involvement in club rugby, all possible interactions with any possible permutation of domestic competition, retaining the right to oversee and impose on player contracts, input to third party contracts, modifying the way the professional and amateur organisations relate and the myriad of other areas in which the interests of Australian Rugby as a whole could vary from the interests of one specific team.

Quote:

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Originally Posted by Lee Grant

You said:




I said: they should require that any private rugby entity given a licence to operate a professional rugby team in Oz should have in its Articles that they must act at all times with the approval of the ARU.


There's not a lot of difference there. The main thing is that a private entity such as the Mitchell group in Melbourne or one that may take over the Tahs separate Super entity down the track, and so on, should not be able to do stuff that is inimical to the national rugby purpose - as reckoned by the ARU.


The (England) RFU didn't think it through at the start of the pro era. The amateurs in charge of the RFU made the rules up as they went along and were trumped by businessmen wiser in the ways of the commercial world.

I think we are both pointing out that the ARU can't let a private enterprise take over professional rugby teams and run roughshod over the national rugby interest as the rugby landscape evolves. Obviously I expressed myself poorly.

The trick is to find investors or consortia of them who are after a large rugby dividend but not necessarily a large cash dividend. This is going to be extremely difficult but not impossible. The ARU have a great duty of care not to let the animals run the zoo.

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maybe i interpreted what you said wrong, and yes whilst i dont want 'to let the animals run the zoo', at times the commercial enterprise has a sharper edge to it then a organisation like the ARU.

Privatising the Super14 and letting the clubs seek other forms of revenue, albeit by invitational competitions or other forms of commercialism may not always be in the ARU's best interest, but thats not to say that it wont be in the games best interest.

I guess the best example of this currently is the 20/20 situation, if a 7's competition akin to the IPL were to be raised offering massive salaries, it wouldnt be in the ARU's best interest to let it become a free for all similar to CA, but at the same time it could potentially be in the games best interest by allowing the players to earn significantly more and generate the game extra publicity.

My issue is that what Private Equity can bring to the game is extra revenue, by having the team to conform continually with the ARU's rules may hinder this potential. Oranisations like the ARU, QRU, NSWRU arent designed to run profits and therefore miss opportunities to bring in extra revenue, and therefore cant contribute more to the game.

Let the new team go, its in the investors best interest to grow the team and have it performing well because this will lead to a increase in revenue and overall profits as well, I dont expect to see a bare bones operations because more people are smart enough to recognise that this isnt the best value.