Aviva Premiership: something exciting happens

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Re: Aviva Premiership: something exciting happens

Postby The Doc » September 5th, 2018, 11:49 am

Grumpy Old Man wrote:
Dave Cahill wrote:And each club would be selling 51% of their stake in the premiership - its actually a pretty poor deal for the clubs because once thats gone, its gone - so they'll be losing 51% of any future income on television deals etc and when CVC sell on, which is their MO, they won't get anything from that sale either.

Owen Slot in the London Times has a good piece on it


Owen Slot in the London Times wrote:The Premiership is in talks over whether to agree a game-changing, historic deal for rugby by selling controlling ownership of the league to a private equity firm for about £275 million.

The deal is regarded by insiders as potentially the biggest step-change in club rugby since the game went professional 23 years ago, and is being compared to when football’s Premier League was formed in 1992.

The executive committee of Premier Rugby Ltd (PRL) has been in negotiations for about a year with CVC Capital Partners, the private equity company based in Luxembourg which made about £8 billion from its decade-long ownership of Formula One.

PRL is owned by 13 member clubs: the 12 sides in the Premiership and London Irish. The 13 club owners will have a special meeting on Tuesday when the executive committee will present the deal with CVC.

It is unlikely that a deal will be agreed and signed immediately but the meeting could give the green light for the completion of the deal. Club sources indicated yesterday that their valuation of the Premiership is higher than CVC’s offer. It is understood that, if the CVC deal is not approved, PRL has other equivalent investment to consider from outside of private equity.


The RFU cannot stop the deal and thus prevent a new, outside influence from becoming one of the key stakeholders in English rugby. The RFU can veto new owners of the individual clubs, although it has no right of veto to ownership of its league.

The concern for English rugby is whether CVC will flex its muscle regarding its key assets. There is already a contest between club and country for control and ownership of the England players. If the deal with CVC were to go through, it would only be in the following years that any disagreement over how much time the players would be released for British & Irish Lions tours, for instance, or extra England camps, would be apparent.

It is understood that CVC would want to be a quiet partner within the game. However, it will be ruthless on commercial rights. It should be expected that it would drive a harder bargain with the RFU over the cost of player release for international windows.

The clubs have struggled in recent seasons to make the business of rugby work; collectively they lose about £30 million a year, on average £2.3 million each. It is hard to see many of them rejecting a windfall that would deliver about £17 million overnight to every club. The clubs could wipe out almost all of their debt. They see the deal as an opportunity to invest by building new stands and facilities.

Recent tranches of income received by the clubs, mainly from the sales of television rights, have gone largely to the players, which served to inflate player wages. However, there is an understanding among the PRL owners that the CVC money would not go the same way; the deal will not instigate another sharp rise of the salary cap.

The majority of the clubs are understood to be in favour of the deal. The significant opponent is believed to be Bath, who are controlled by the most influential of the owners, Bruce Craig.

CVC, it is understood, regards the Premiership to have been severely undercommercialised in the past decade. CVC’s model with F1 was based largely on selling TV rights globally. This is a pool in which PRL has only dipped its toes. CVC shares a strong relationship with Sky, the broadcaster of F1, who is likely to return to the negotiating table for TV rights of club rugby.

There will be concern, too, for CVC’s exit strategy. It will only be interested in leaving with a large return on its investment, as it did with F1 in January last year. Another potential problem for the clubs is that when CVC sells on its 51 per cent controlling stake, they could find themselves under any ownership. The Times understands that the fine-tuning of the terms for exit from the deal have yet to be completed, though first rights may go to the 13 clubs.

The deal could provide a significant windfall for English rugby, but there is huge potential for an escalation of the antipathy between clubs and the RFU.

Sports’ domestic TV rights:

Premiership Rugby (BT Sport) - £45 million per year
Premier League football (Sky, BT Sport, Amazon) - £1.5 billion per year
English cricket including internationals (Sky, BBC) - £220 million per year
Super League rugby league (Sky) - £40 million per year
NFL American football US TV rights - £5.5billion per year


Kerry Packer anyone? There is a risk that if relationship with RFU doesn't go well, it brings the Unions in conflict with private ownership (again) and the main leverage will be player access to international rugby.

As with any private equity fund, the most interesting question is the exit strategy of the fund - you can be sure they will go into the deal with a clear exit strategy.
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Re: Aviva Premiership: something exciting happens

Postby dropkick » September 5th, 2018, 1:18 pm

I can see the attraction in buying it. Rugby is getting more popular globally so they probably think they won't lose money when they sell it on. It could be a success and they could make a lot of money so it's worth the gamble.


For the owners it's also attractive. They get to pay off debt so it's a nice pay day for them. The Bath owner isn't so keen on the deal but he's a billionaire so he won't be as concerned about losing a few million. The others probably sense a way of getting back some of their investment. The fact that they want to do this tells us that they're pessimistic about growing the league.


Long term I don't think it's a good deal for English rugby. The RFU will be worried but they already pay the club's millions per year and have a long term deal with them.


The french league is still the main threat to unions and the premiership. It's their money that's putting everyone else under pressure. The English premiership has a long way to go to catch up with them.
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Re: Aviva Premiership: something exciting happens

Postby blockhead » September 5th, 2018, 7:26 pm

I'd imagine that one of CVCs demands would be an end to relegation.
Then "no relegation" would be the best idea ever.
Remember when the toughness of the prem was why English teams were the best in Europe and now of course its the reason why the Pro14 teams are kickin their limey butts!
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Re: Aviva Premiership: something exciting happens

Postby LeRouxIsPHat » September 5th, 2018, 9:41 pm

It looked like relegation was going to be scrapped regardless but Nigel Melville was interviewed after the London Irish game the other day and said that its not happening. It also sounds very much like the RFU will be reducing payments once the current deal is up in a couple of years so really it looks like there could be a civil war on the horizon.
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Re: Aviva Premiership: something exciting happens

Postby cormac » September 5th, 2018, 11:44 pm

LeRouxIsPHat wrote:It looked like relegation was going to be scrapped regardless but Nigel Melville was interviewed after the London Irish game the other day and said that its not happening. It also sounds very much like the RFU will be reducing payments once the current deal is up in a couple of years so really it looks like there could be a civil war on the horizon.


Civil War to be followed by Infinity War?
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Re: Aviva Premiership: something exciting happens

Postby tomthefan » September 6th, 2018, 8:49 am

Dave Cahill wrote:It's basically taking a once off up front payment for their television deal and whatever centralised revenue the premiership generates. Its not a lot of money for this and as "homestore and more" would say, once its gone, its gone. If CVC decide to sell on, as they did with F1, the clubs will get nothing out of it and won't have much of a say.


I think you're right.
The Times article quoted above says that BT are paying £45 million a year currently.
Say there'e another £10 million a year from Aviva or whoever to bring it up to £55 million a year in rights.
CVC would get 51% of that which would be £28 million a year which would be an annual return of 10% for them
on their investment of £275 million.
Even if the tv rights were to drop by 50% they'd still be in positive return on investment territory.
There doesn't seem to be much of a downside for CVC.
If they need the money, the premiership clubs would do better to negotiate a bank loan of £275 million and devote the same £28 million a year
to paying that off. Back of an envelope calculation says that at a rate of 5% that would pay it off in 13 years.
In the meantime they'd get to pocket any increases in tv rights and at the end of 13 years they'd have the full
rights back again.
Looks like a really bad offer from CVC to me.
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Re: Aviva Premiership: something exciting happens

Postby tomthefan » September 6th, 2018, 8:57 am

Walesonline says the current pro14 tv deals are worth £30 million a year.
That's a lot better than I was expecting it to be.

https://www.walesonline.co.uk/sport/rug ... d-14594775
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Re: Aviva Premiership: something exciting happens

Postby The Doc » September 6th, 2018, 10:49 am

tomthefan wrote:I think you're right.
The Times article quoted above says that BT are paying £45 million a year currently.
Say there'e another £10 million a year from Aviva or whoever to bring it up to £55 million a year in rights.
CVC would get 51% of that which would be £28 million a year which would be an annual return of 10% for them
on their investment of £275 million.
Even if the tv rights were to drop by 50% they'd still be in positive return on investment territory.
There doesn't seem to be much of a downside for CVC.
If they need the money, the premiership clubs would do better to negotiate a bank loan of £275 million and devote the same £28 million a year
to paying that off. Back of an envelope calculation says that at a rate of 5% that would pay it off in 13 years.
In the meantime they'd get to pocket any increases in tv rights and at the end of 13 years they'd have the full
rights back again.
Looks like a really bad offer from CVC to me.


Not being snarky but I think you are mixing up revenue with profit. £28mm per annum would be 10% return if that was the profit paid back to shareholders but it isn't. It is a revenue stream to the clubs (collectively) which along with gate receipts and other sponsorship make up their total revenue. They then need to pay their expenses. Collectively the league loses money each year - IIRC only two clubs generated a positive cash flow last year. Which means that taking the league as a whole there is currently a negative return.

But more importantly - as I understand it - the offer is to buy 51% of the league. Not the individual clubs. The revenue the clubs earn is not part of the league financial position. The TV money probably is - but is contracted down to the clubs. I would think that CVC would plan to retain a % of increased revenue in the league structure and that would be their return - so it probably is reliant on selling the league to new markets to generate a more valuable franchise which they will then sell on for their profit.

The clubs (as shareholders in the league) would get the cash injection in return for giving up 51% of any increase in value. The attraction is that they could repay all the sunk money - the accumulated losses. Would certainly benefit the owners and allow them out of the hole they are in. But no guarantee it would benefit the rugby side of things. And I can see it coming with ring fencing i.e. a separation from the lower leagues and eliminating promotion / regulation. Become more like the NFL franchise system
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Re: Aviva Premiership: something exciting happens

Postby tomthefan » September 6th, 2018, 12:00 pm

Are you certain that you're not mixing up the clubs, with the league?
As a 51% shareholder in the league, CVC would be entitled 51% of the profit
the league makes.
Currently this profit is all distributed to the clubs, they being the sole shareholders and helps
determine whether they make a profit or loss. But that's really up to them.
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Re: Aviva Premiership: something exciting happens

Postby The Doc » September 6th, 2018, 1:23 pm

tomthefan wrote:Are you certain that you're not mixing up the clubs, with the league?
As a 51% shareholder in the league, CVC would be entitled 51% of the profit
the league makes.
Currently this profit is all distributed to the clubs, they being the sole shareholders and helps
determine whether they make a profit or loss. But that's really up to them.


Are you sure "Premiership Rugby Ltd" makes any profit? I could be looking at the wrong legal entity but that one doesn't according to lodged financial statements. Even if there is another legal entity - I would be surprised if it makes any profit currently. I suspect that any revenues are subject to revenue share with the clubs (as opposed to dividends or profits) so no profits.
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Re: Aviva Premiership: something exciting happens

Postby tomthefan » September 6th, 2018, 1:38 pm

The Doc wrote:Are you sure "Premiership Rugby Ltd" makes any profit? I could be looking at the wrong legal entity but that one doesn't according to lodged financial statements. Even if there is another legal entity - I would be surprised if it makes any profit currently. I suspect that any revenues are subject to revenue share with the clubs (as opposed to dividends or profits) so no profits.


So it's a company and you've seen the financial statements and it doesn't make a profit.
Does it make a loss or break even then?
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Re: Aviva Premiership: something exciting happens

Postby The Doc » September 6th, 2018, 3:14 pm

tomthefan wrote:
The Doc wrote:Are you sure "Premiership Rugby Ltd" makes any profit? I could be looking at the wrong legal entity but that one doesn't according to lodged financial statements. Even if there is another legal entity - I would be surprised if it makes any profit currently. I suspect that any revenues are subject to revenue share with the clubs (as opposed to dividends or profits) so no profits.


So it's a company and you've seen the financial statements and it doesn't make a profit.
Does it make a loss or break even then?


Ok - guess who has a spare 30 mins in work!!!

Premiership Rugby Ltd is a shell company with no income, expenses or assets. I looked at the shareholders and it is wholly owned by "Premier Rugby Ltd" which is the main vehicle and the one you are interested in. The details for Premier Rugby Ltd (PRL) as at the last lodged accounts (30th June 2017) are;

Total revenue = £70mm (up from £58mm previous year)
Cost of Sales = £65mm (so this is mainly the rev share to the clubs I would imagine - however the rev share is somewhat determined by shareholding it says in the notes though it doesn't specify and it doesn't state which share classes - there are three separate share classes)
Gross profit = £5.4mm
Admin expenses = £5.8mm
Operating loss = £400k
Adjustments & interest = £400k
Net Profit = £1,599

Balance sheet net assets = £30,000
Notes in statements state the company hasn't and doesn't intend to pay dividends

I would imagine the net profit is managed to be kept close to zero. If other shareholders came in I would imagine the rev share agreement will have to be redrawn - can't tell from this whether a new shareholder would have entitlement to rev share.
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Re: Aviva Premiership: something exciting happens

Postby tomthefan » September 6th, 2018, 3:46 pm

The Doc wrote:
tomthefan wrote:
The Doc wrote:Are you sure "Premiership Rugby Ltd" makes any profit? I could be looking at the wrong legal entity but that one doesn't according to lodged financial statements. Even if there is another legal entity - I would be surprised if it makes any profit currently. I suspect that any revenues are subject to revenue share with the clubs (as opposed to dividends or profits) so no profits.


So it's a company and you've seen the financial statements and it doesn't make a profit.
Does it make a loss or break even then?


Ok - guess who has a spare 30 mins in work!!!

Premiership Rugby Ltd is a shell company with no income, expenses or assets. I looked at the shareholders and it is wholly owned by "Premier Rugby Ltd" which is the main vehicle and the one you are interested in. The details for Premier Rugby Ltd (PRL) as at the last lodged accounts (30th June 2017) are;

Total revenue = £70mm (up from £58mm previous year)
Cost of Sales = £65mm (so this is mainly the rev share to the clubs I would imagine - however the rev share is somewhat determined by shareholding it says in the notes though it doesn't specify and it doesn't state which share classes - there are three separate share classes)
Gross profit = £5.4mm
Admin expenses = £5.8mm
Operating loss = £400k
Adjustments & interest = £400k
Net Profit = £1,599

Balance sheet net assets = £30,000
Notes in statements state the company hasn't and doesn't intend to pay dividends

I would imagine the net profit is managed to be kept close to zero. If other shareholders came in I would imagine the rev share agreement will have to be redrawn - can't tell from this whether a new shareholder would have entitlement to rev share.


Thanks for the info.
I'm worried for CVC now. I hope they don't buy the wrong sort of shares by mistake.
They might only come away with 51% of a grand and a half. :shock:
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Re: Aviva Premiership: something exciting happens

Postby blockhead » September 7th, 2018, 3:36 pm

Mike Ford off to coach the Germans.
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Re: Aviva Premiership: something exciting happens

Postby blockhead » September 11th, 2018, 10:49 pm

Again, I know, its the mail but...
https://www.dailymail.co.uk/sport/rugbyunion/article-6156853/Jones-pay-consultants-pocket-RFU-cash-crisis-hits-World-Cup-preparations.html
They made lorry loads of cash from the World Cup, didn't they? Where's it all gone?
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Re: Aviva Premiership: something exciting happens

Postby Dexter » September 12th, 2018, 1:34 pm

They rejected CVC - want to retain control which is understandable
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Re: Aviva Premiership: something exciting happens

Postby paddyor » September 12th, 2018, 2:43 pm

blockhead wrote:Again, I know, its the mail but...
https://www.dailymail.co.uk/sport/rugbyunion/article-6156853/Jones-pay-consultants-pocket-RFU-cash-crisis-hits-World-Cup-preparations.html
They made lorry loads of cash from the World Cup, didn't they? Where's it all gone?

They never accounted for the loss of income from the AIs during the RWC is one of the things. Think they also never budgeted properly for the home and away imbalance in the 6 nations. Really stupid stuff.
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Re: Aviva Premiership: something exciting happens

Postby blockhead » September 12th, 2018, 2:59 pm

paddyor wrote:
blockhead wrote:Again, I know, its the mail but...
https://www.dailymail.co.uk/sport/rugbyunion/article-6156853/Jones-pay-consultants-pocket-RFU-cash-crisis-hits-World-Cup-preparations.html
They made lorry loads of cash from the World Cup, didn't they? Where's it all gone?

They never accounted for the loss of income from the AIs during the RWC is one of the things. Think they also never budgeted properly for the home and away imbalance in the 6 nations. Really stupid stuff.


Still though, they made a lot of money in the 2016/17

RFU Revenue:
2016-E461M (E260M from WC)
2017-E210M
(According to the RFU’s Annual report 2016/17)
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Re: Aviva Premiership: something exciting happens

Postby paddyor » September 12th, 2018, 3:06 pm

Yeah but they budgeted for more expenditure than they had in revenue from previous and current years and ran down there reserves.
Ruddock's tackle stats consistently too low for me to be taken seriously as a Six Nations blindside..... Ruddock's defensive stats don't stack up. - All Blacks Nil, Jan 15th, 2014
England A 8 - 14 Ireland A, 25th Jan 2014
Ruddock(c) 19/2 Tackles
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Re: Aviva Premiership: something exciting happens

Postby tomthefan » September 12th, 2018, 3:07 pm

Obviously the RFU are going to have a higher turnover than the IRFU but it would be nice to see a side by side comparison for the various breakdowns of that.
Also the figure above is about 3 times that of the IRFU, I'd have thought the ratio would be greater.
One thing that surprised me in recent years was the WRU having a greater turnover than the IRFU. What's that from, the fourth AI?
What's the WRU doing with its money if it isn't giving much to the regions?
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