Billionaire Andrew Forrest eyes stake in Rugby Australia
Anne Hyland
By Anne Hyland
September 19, 2022 — 5.00am
Australia’s richest man Andrew “Twiggy” Forrest has held informal talks with Rugby Australia about investing in its commercial rights, as part of a billion-dollar gold rush by professional investors into the nation’s major sporting codes.
Rugby Australia, the governing body of rugby union, is understood to have held informal discussions with private equity firms Silver Lake, CVC Capital Partners, and Forrest, and is expected to finalise a deal in the next six to nine months to sell a minority stake.
Forrest’s company Tattarang, which funds the Perth-based Super Rugby team Western Force, is interested in acquiring a stake in Rugby Australia, and is in discussions with Bruin Sports Capital, according to sources who spoke on the condition of anonymity because the discussions are confidential. Bruin is in a strategic partnership with CVC.
Tattarang and Rugby Australia chair Hamish McLennan declined to comment. Last week, Rugby Australia signed a sponsorship deal with the Tattarang-owned RM Williams.
Rugby union sporting bodies globally have been doing deals with private equity firms, with CVC building a dominant commercial position in the game. CVC is close to a deal with South African rugby, and last year sealed a £365m ($609 million) deal with the Six Nations, Europe’s top annual national rugby tournament, taking a one-seventh share of the group.
In June, New Zealand Rugby signed a $NZ200 million ($180 million) deal with Silver Lake for about 6 per cent, which valued the governing body’s assets at $NZ3.5 billion.
By building a series of stakes across rugby’s sporting bodies CVC and Silver Lake are in a position to reshape rugby union globally. The changes they could make to improve the game’s financial returns include bundling broadcast rights to competitions around the world into a single package, expanding the game by creating a Champions’ tournament, or controversially forcing a simplification of the game’s rules by tackling its bureaucracy. The complicated rules of rugby have increasingly turned off fans and slowed the game in comparison to other codes such as rugby league and the AFL, making it less appealing as entertainment.
“We’re in an optimal position to do a deal with private equity as one of the last major unions left standing.”
Rugby Australia, which has underperformed operationally for a number of years, has a $40 million loan with investment group Ares SSG Capital Management, which has also been a significant investor of sport around the world. Rugby Australia would be hoping to achieve a deal comparable to that struck by New Zealand Rugby, especially ahead of it hosting the 2025 Lions Tour of Australia, and also the 2027 men and women’s World Cups.
“We’re in an optimal position to do a deal with private equity as one of the last major unions left standing,” said Rugby Australia chair Hamish McLennan. “We still need to provide final details to the member unions and the Super Clubs, but it would be fair to say we have an agreement in principle to progress forward.
“We’ll be selling a portion of Rugby Australia’s future revenue streams to help fund the growth and development of grassroots and our pathways for men and women.”
“We’ll be selling a portion of Rugby Australia’s future revenue streams to help fund the growth and development of grassroots and our pathways for men and women.” said Rugby Australia chairman Hamish McLennan.
“We’ll be selling a portion of Rugby Australia’s future revenue streams to help fund the growth and development of grassroots and our pathways for men and women.” said Rugby Australia chairman Hamish McLennan.CREDIT:EDWINA PICKLES, STUART WALMSLEY
The pandemic laid waste financially to all sporting bodies’ earnings as restrictions on gatherings at major events cut revenues for sports and leagues. Last year, Silver Lake paid 33 per cent for a stake in soccer’s A-league for $140 million, with the funds from that deal to be used to buy marquee players, expand the A-League Women’s season, and invest in digital and marketing programs.
Silver Lake, like CVC, has been stepping up its bets on the sports industry, with investments ranging from football and rugby to baseball across the globe. Silver Lake last week increased its investment in the company that owns English Premier League team Manchester City. While CVC last year did a €2 billion deal with La Liga, which runs the top two divisions of professional football in Spain. CVC is entitled to 8.2 per cent of the Spanish leagues commercial profits for the next 50 years from that deal.
“These funds are astute hard-nosed investors looking for attractive commercial returns, so they’re not investing to be Santa Claus, but they can also be very positive catalysts for sports.”
In Australia, other sporting bodies such as Cricket Australia and Netball Australia have held discussions with private equity firms. Silver Lake and CVC are understood to have spoken to Cricket Australia, which has been struggling to compete for players given the deep pockets of the Indian Premier League and the new UAE T20 competition, which begins in January.
NSW Cricket chair John Knox said its board was supportive of private equity investment coming into the game’s governing body Cricket Australia because of the competitive pressures facing the game.
“The cricket New South Wales board is supportive of considering private equity investment in the game to drive the growth and leverage the capability of others. It’s complicated and requires careful consideration but continuing to be comfortable with the status quo comes with significant risks of its own.”
Knox, who is also chair of Ares in Australia, said the risk was that cricket became a club-based competition around the world and players followed the money. “We’ve got to pay the players to keep them playing in Australia, and in turn that will attract more dollars from broadcasters, and that money will flow back down to the grassroots.”
Typically, private equity firms buy a stake in an organisation and then work to improve its performance through their commercial and technological expertise, with an eye toward eventually selling out.
A private equity investor, who asked not to be named, said that Cricket Australia could draw as much as $500 million in investment by selling a minority stake.
John Wylie, a former investment banker, who has also been chair of the Australian Sports Commission and Melbourne Cricket Ground Trust, said private equity was interested in investing in cricket because there are under-exploited commercial opportunities.
“The quality of the Big Bash League product, for example, has declined in recent years, yet it’s the shopfront window for the sport into new markets. Cricket generally faces an increasing fight for relevance with a lot of young Australians knowing the names of players in the English Premier League or the National Basketball Association more than the Test team, so it’s critical that Cricket Australia is entrepreneurial, and willing to take risks in how it thinks about the future of the sport. Bringing private equity into the BBL could be a positive part of that.”
“Private investors see the opportunity in sports media rights because sport is one of the few things that can pull together a mass audience, even a global one,” says former investment banker and Australian Sports Commission chair John Wylie.
“Private investors see the opportunity in sports media rights because sport is one of the few things that can pull together a mass audience, even a global one,” says former investment banker and Australian Sports Commission chair John Wylie.CREDIT: ARSINEH HOUSPIAN
In addition to driving greater returns from sporting business, private equity is attracted to the growth in value of digital and broadcast sporting rights, which has only increased with the advent of streaming services.
“Private investors see the opportunity in sports media rights because sport is one of the few things that can pull together a mass audience, even a global one, and those audiences continue to grow,” said Wylie, who is a founder of Tanarra Capital. “Investors will pay for that exposure and growth, as well as the franchise and brand value.”
Still, private equity is there to make money and that will create tension with some fans who consider their teams to be cultural institutions rather than businesses.
“These funds are astute hard-nosed investors looking for attractive commercial returns, so they’re not investing to be Santa Claus, but they can also be very positive catalysts for sports,” said Wylie. “Rugby globally is a sport that desperately needs the reform that the impetus of private capital can provide.”
Netball Australia recently rejected an unsolicited $6.5m bid to buy out its debt and take over the Super Netball competition from a private equity group led by entrepreneur and former cricketer Matt Berriman.
Netball Australia said it would not be rushed into a deal until it completed a review of the sport. The deal was dismissed by at least one other private equity investor as “laughable” for the amount being offered.
Netball Australia chair Marina Go, who is also on the board of Transurban, 7-Eleven, Adore Beauty and Energy Australia, said the sporting organisation remained open to institutional capital at the “right value, with the right business model and the right partner”.
“There are definitely options to bringing in investment partners to raise capital for expansion and growth into the future,” she said. “We’ve spoken to, for example, the people involved in New Zealand Rugby’s deal with Silver Lake, to understand what that looked like because it’s not just about money. It’s about the ongoing governance, and the impact on the rest of the sport. Finding the right partner is actually more important than then having the highest bid.”
Go said it was fundamental to understand what the private equity partner’s exit strategy would be. “You don’t want to find yourself taking an upfront gain, and then leaving the sport in a very difficult situation down the line.”
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