Saru’s proposed equity deal – factions, egos,

As usual in South African rugby, whenever a major decision needs to be made, there are factions at loggerheads, agendas to be serviced, egos to massage and deals to be done in the shadows.

The South Africa Rugby Union (Saru), it must always be remembered as you read this column, is a membership organisation. It is a body made up of the 15 provincial unions in the country. It doesn’t unilaterally make decisions.   

Saru has a president, elected by its constituent members and a CEO appointed by its board. There are operational, finance, commercial and high performance staff on the payroll. Organisationally, Saru is mandated by the 15 provincial unions to run rugby in South Africa.

Saru is not a stand alone body that dictates to the 15 unions. If an important strategic decision, such as leaving Super Rugby or joining the United Rugby Championship (URC) needs to be made, the members decide on it by vote.

That is what’s happening with the current proposed equity deal. Saru was mandated by its members to sell a stake in its commercial ventures to raise cash and create new income streams in a shifting financial world.

They have settled on an investor and now the general council, made up of representatives (presidents) of the 15 unions, must decide to accept or reject it. 

ASG proposal 

Former CEO Jurie Roux started the process in 2020 under instruction from the general council based on projections of a dire financial future for rugby. 

And current chief executive Rian Oberholzer has continued the process and driven it to the point where it is now. 

Long story short, Saru has negotiated a deal with an American outfit called Ackerley Sports Group (ASG) made up of several investors. It turns out that two of those investors are Johan van Zyl and Patrice Motsepe of African Rainbow Capital, who own a 37% stake in the Bulls.

This contract guarantees $75-million (R1.3-billion) for a 20% stake in Saru, and therefore its members, paid over a few years. That’s important and vital, but it’s really not the meat of the deal.

The real value is expected to be in the future income that ASG brings into the SA Rugby ecosystem by leveraging their contacts in the international market. 

In short, ASG wants to make the Springboks and South African Rugby more valuable and profitable. Speaking to multiple sources, they want to be active partners in driving revenue earnings. 

There has been some grumbling that New Zealand Rugby (NZR) received much more for selling a much smaller stake to Silver Lake Capital. But according to Statista, the All Blacks were valued at $282-million in 2023, so Silver Lake might have overpaid substantially. 

Of course, those promises of raising future funds and driving the value of South African rugby, particularly the Springboks, up, are just that. Promises and projections. Nothing is guaranteed. Just look at this line from the NZ Herald, published 18 months into the Silver Lake deal: 

“The combination of lower-than-forecast revenues and higher-than-predicted costs – which includes a $10.5-million per annum interest payment to Silver Lake – [has] led NZR to project a new financial scenario in which the reserves built from selling a 5.7 percent equity stake in its commercial assets will be seriously depleted before there is a material lift in income.”

ASG’s total valuation of Saru and the Boks is $375-million, which seems far more realistic than the billions the NZR were proclaiming. 

Sceptical

Several of the equity investors in South African club rugby, are sceptical of the ASG deal. Let’s call a spade a spade. They don’t want the ASG deal to go ahead.

Over the past 72 hours, my phone has been inundated with messages from intermediaries of unnamed people telling me the Saru/ASG is bad.

“It hasn’t been fully explained, ASG hasn’t raised the funds, the structure favours ASG, nor Saru, it’s a loan, not an investment,” is the gist of the messages I’ve received. 

What none of these messages has directly explained, is why the ASG proposal is bad. There is a lot of innuendo that someone at Saru is taking a backhander and that it’s only a deal to enrich a few (unnamed) people at Saru. I’ve not received, nor uncovered any evidence to corroborate these “hints”. 

When I ask if there is an alternative/better deal available, the answers are equally vague.

There may be truth to what I’m being steered to believe. Or there may not. But I certainly hope those are questions members are seeking answers to before they vote.

Ironically, these are the same questions you could ask of equity owners’ deals to acquire stakes in the Bulls, Sharks, Stormers and Lions.

I’ve not seen the structure of those deals, and other than some broad brush strokes, the finer details of those equity deals have not been in the public domain.

Which serves to underline that these transactions, whether they’re for a stake in the Springboks or the Sharks or Stormers, should be far more transparent than they are. 

The Springboks are a national asset and the news of the proposed sale of equity in Saru is in the national interest. It should be in the public domain.

If there is another deal being hatched, and I’ve heard that three of the provincial equity partners have put one together, the details of that proposal should also be transparent.

Instead, we have a situation that repeats itself regularly. 

Don’t be lemmings

Now more than ever, Saru’s member unions should not be unquestioning lemmings and just accept the Saru/ASG deal. They need to ask questions and interrogate the deal.

They need to ensure they are comfortable with the terms and if needs be, they must request more time to study the documentation. 

Equally, they need to be watchful of self-interest from those that oppose the ASG proposal without sound reason, or for narrow self-interest. 

Saru’s general council is set to vote on whether to accept the ASG deal on Thursday, 17 October. It needs a 75% majority to pass and, at this stage, it’s too close to call.

Western Province remains under administration due to its own previous malfeasance at boardroom level and therefore does not have a vote. And Limpopo is an affiliate member without a vote, which means there are 13 members set to cast a vote. It needs at least 10 votes to pass. 

I understand that Sharks and Boland (who are a feeder union to Durban) will oppose. The Bulls were also in the nay camp, although since the revelation that Motsepe and Van Zyl, two of their owners, are part of the ASG consortium, their stance could change.

It seems then that the Lions might be the swing vote. They have been allied with their colleagues in the big four (Bulls, Stormers and Sharks) in butting heads at Saru over the last few months. If they vote against then the ASG deal is likely to die on the spot. 

That will make a few people in South African rugby happy and leave the game facing an uncertain future. 

Several administrators have said to me the game will suffer huge cuts in the next 18-24 months if there isn’t an injection of cash and a growth spurt in earnings. That may be scaremongering by those selling the ASG deal, or it may be the truth. Do we really want to find out the hard way?

As one member said to me: “Would Saru do a deal to impoverish rugby?” 

However cynical you might be, it’s hard to imagine anyone knowingly making a deal that will sink rugby. Unless you believe the innuendo.