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.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 itOwen 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
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.
