Analysis - New Zealand Rugby and Silver Lake finally appear set to tie the knot, after a long courtship of the Players' Association and Provincial Unions.
Photo: RNZ
The deal will be voted on at a special general meeting in Auckland on Thursday and it's expected NZR will get the majority required.
The proposed deal would result in Silver Lake investing $200 million in a new commercial entity that will control all revenue-generating assets of NZR.
The entity would be called CommercialCo and remain under the control of NZR.
An additional co-investment of up $100m will be offered to New Zealand-based institutional investors later in 2022.
At the conclusion of the additional co-investment, Silver Lake will own between 5.71 percent and 8.58 percent of NZR CommercialCo, representing $200m-$300m investment, depending on capital needs and the uptake of New Zealand-based institutional investors.
The provincial unions and the latest sticking points?
The 26 unions approved the initial proposal that was shot down by the New Zealand Rugby Players' Association.
The unions weren't so happy with the renegotiated deal approved by NZR and the players' association and wanted changes made.
It's believed NZR have offered the provincial unions a "capped funding agreement'', so if they get a percentage of commercial income, that would hit a maximum payout if turnover increased to a certain level.
The provincial unions want the cap removed.
They also want a representative/seat on the CommercialCo board.
The players' association managed to get a voice at that table and the unions want one too.
Nili Latu celebrates Bay of Plenty's Ranfurly Shield win over Auckland in 2004. Photo: PHOTOSPORT
What are the potential pitfalls?
Both the players' association and provincial unions wanted assurances as to how NZR will mitigate the risk of the deal not generating as much income as they had hoped.
If the Silver Lake deal goes bad and doesn't produce the revenue anticipated, NZR could end up with less money than before. Would NZR then cover costs? Or would the players share the risk also? Would NZR be forced to sell other assets?
What happens if Silver Lake decide to pull out of the deal after their first tenure (a possibility even if they make money) and NZR does not get a second cycle with the company? What if NZR then cannot afford to buy that stake back, could it be sold to another company which does not have New Zealand rugby's best interests at heart?
There are also concerns the deal could damage the relationship between rugby and the New Zealand public.
In a letter sent to NZR before the parties went to mediation, the players' association said, "We believe there is a risk that this special bond and the nature of what rugby means to New Zealanders, players and spectators alike, is at risk in the proposed transaction."
There are risks that come with the lucrative deal, according to a report leaked to Stuff journalist Tom Pullar-Strecker.
Pullar-Strecker said the PWC report, commissioned by NZR and given to provincial rugby unions earlier this year, says the initial money from the deal could help grow the game and "shore up the wider rugby system" to combat declining participation numbers and viewership.
The report said that would give NZR more freedom to take "increased risks in pursuit of new global revenue streams".
The report also claimed New Zealand Rugby did not need all the Silver Lake money right now.
Pullar-Strecker said the report states that NZR is exploring new opportunities to create income, including "executive coaching and All Blacks clinics", involvement in e-sports, and a yet to be created streaming platform, which could bring in tens of millions of dollars.
The report said the "achievability of the new business initiatives remains uncertain" but that there was "more upside than risk".
The report also noted that once the deal was done, and a stake in NZR sold, the decision was "likely to be irreversible"
Why does New Zealand Rugby need the money?
New Zealand Rugby was hit hard by Covid, losing $40 million in 2020, close to half of its cash reserves.
It bounced back in 2021, posting a $5.5m profit, but that was the organisation's first profit in five years.
Even without the pandemic NZR's current financial model is unsustainable. They lose money most years and are struggling to keep up with the salaries top players can earn overseas.
If they want the All Blacks to maintain their levels of success and retain the country's best players, they need more moolah.
Provincial rugby is bleeding out and needs money. Otago had to be bailed out in 2012 and Wellington needed NZR to come to the rescue in 2014 (due to costs associated with hosting the World Series Sevens tournament). Taranaki, Wellington, Canterbury and North Harbour all posted deficits in 2018.
Clubs are struggling to attract and keep players; teenage boys are leaving the game and participation levels are down. Grassroots rugby is struggling. A cash injection to the tune of $465m would help and without it, NZR probably can't survive.
Photo: PHOTOSPORT
Want a women's Super Rugby competition? NZR boss Mark Robinson has made it clear that without the Silver Lake deal a professional women's competition is likely to remain just a dream.
As a colleague of mine wrote: "If we want club rugby and schools rugby and women's rugby and Māori rugby and Pasifika rugby - and we want to retain elite coaches such as [Crusaders mastermind] Scott Robertson - then the money has to come from somewhere. In most instances that's via NZR."
Will the deal get over the line?
In short, yes. The parties involved have been in mediation and RNZ understands those talks have been productive.
Despite the grumblings from the provincial unions and before that the players' association and other stakeholders, New Zealand Rugby (and rugby in New Zealand) needs money to protect its future, keep the country's best players here and fight back against ever dwindling participation numbers in club and school rugby.
