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#Post#: 5263--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: Fearless Fred
Date: September 6, 2018, 3:05 am
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Looks like it's going to be rejected:
From the Telegraph
HTML https://www.telegraph.co.uk/rugby-union/2018/09/05/premiership-rugby-reject-275m-bid-private-equity-firm-cvc-50/
--- Quote ---
> Premiership Rugby are expected to reject a £275 million
bid for a major share in England’s top league from a private
equity firm – although two other finance-raising options are
understood to be under strong consideration, Telegraph Sport can
reveal.
>
> Private equity firm CVC Capital Partners, who bought a 70 per
cent stake in Formula One in 2006 for about £1.3 billion
and last year sold it to Liberty Media for around
£6.2 billion, have made an offer to secure a 50 per cent
holding in English club rugby’s elite tournament.
>
> The deal, regarded in some quarters as a potential
game-changer for the club game, will be considered by owners at
a board meeting on Tuesday.
>
> However, the organisation’s rules state that such a financial
investment requires unanimous agreement from clubs and it is
understood that several believe CVC’s offer undervalues the
tournament, despite combined losses of around
£28.5 million last year.
>
> Premiership Rugby has seen its turnover rise dramatically to
£70 million this season, a rise of 88 per cent in five
years and those opposed to the offer believe that it does not
reflect the potential growth of the league.
>
>
> Premiership regulations also state that no entity is allowed
more than 25 per cent shareholding, which is currently split
between 13 clubs although the clubs would have the right to
alter that if unanimity is reached.
>
> However, it seems that the CVC’s valuation of the league at
£550 million has left some club owners underwhelmed while
others have expressed concerns with giving an outside body a
major say in the sport’s affairs.
>
> “Given the rise of the revenue over the last five years, the
offer of £275 million is not enough,” said one senior club
source. “Selling 50 per cent or more of the league might give us
a short-term windfall, but it would result in lower central
revenues going forward unless the investor is able to increase
them significantly.”
>
> Caution expressed over the CVC offer could make two other
options that will be presented to club owners on Tuesday more
attractive.
>
> It is understood that clubs will also consider an offer of
smaller financial investment for a minority shareholding as well
as an option to effectively take out a “mortgage” on future
league revenues, giving the clubs a much-needed short-term cash
injection.
>
> Any new investment is likely to see the majority of clubs
insist that it does not result in a hike in the salary cap and
demand instead that the money is used to invest in facilities to
grow the domestic game.
>
> Saracens are currently looking for an investment for a
£30 million for a new stand at Allianz Park while
Harlequins, Bath and Newcastle are also planning to upgrade
their stadiums.
>
> The prospect of an outside investor seeking to increase the
commercial value of club rugby also raised fears of fresh
aggravation with the Rugby Football Union over the release of
top players to England, with the potential that clubs would
demand more money from the governing body.
>
> The RFU declined to comment beyond saying that it would
monitor developments, although one senior source claimed that a
deal would require approval in a special general meeting.
>
> “What will happen to academies and player development if
profit is the motive,” said the source. “How can the RFU inject
huge amount of funding into a company who will be looking for a
9.25 per cent annual return on investment?”
>
> The clubs, however, moved to reassure those fears by insisting
that any new investor would respect the current eight-year
£225 million deal signed with the RFU in 2016, which
secures greater access to England players and offers financial
incentives for clubs to field English-qualified players.
>
> Eddie Jones, the England head coach, refused to be drawn on
the potential impact of a new investment in the club game,
saying only that access was already at a minimum.
>
> “We can’t get them [players] any less,” said Jones. “If we get
them any less, we won’t see them at all. If you look at
Australia, New Zealand and South Africa at the start of the
Rugby Championship they got a four-week camp. If they want to
give them to us any less then I’ll be out of a job. I might be
out of a job anyway!”
>
> Another senior source reflected concerns about the impact that
outside investors would have on English rugby as a whole. “There
is a real danger of the clubs getting blinded by money,” said
the source.
>
> Tom Gladstone, director of consulting at sports marketing firm
Synergy, said he expected CVC to secure a TV deal in America if
their deal was accepted.
>
> “I wouldn’t have said it has Premier League or F1 level of
potential, but there is clearly a realisation that there has
been under-commercialisation,” he told Telegraph Sport.
>
>
> “From a central revenue point of view, the biggest potential
is clearly on the TV broadcast deal.
>
> “With BT and Channel 5 deals coming up in 2021, the TV deals
will be foremost in their minds.
>
> “The natural rugby playing nations are potential new markets,
but America, with Gallagher [as Premiership sponsor] coming in,
will be a big strategic push.
>
> “I can’t imagine the salary cap will be moved. I think there
will be close controls on where the new money is spent. It will
need to be invested in infrastructure and marketing to grow the
game.”
--- End Quote ---
#Post#: 5264--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: olipool
Date: September 6, 2018, 3:09 am
---------------------------------------------------------
TomBuckQuin well done for avoiding the knee jerk reaction of
"They want to make money so it must be bad".
But my concerns with CVC's proposal are:
1. If they take over 51% of the business, they presumably get
51% of the profit. So in return for £20m ish per club, the clubs
are handing over half of their future dividend income from PRL.
You would hope that thje clubs invest the £20m and grow things
so that they can replace that lost future income. But based on
past history, what's the chance they all just spank it? So
effetively by taking the money now, are they mortgaging their
future?
2. CVC aren't a charity so will be putting in £275 with the aim
of getting more than that back. I don't know what they did in F1
but it sounds from others here as though they made it lots more
expensive. Which would be a shame.
OP
#Post#: 5275--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: Monte
Date: September 6, 2018, 3:59 am
---------------------------------------------------------
Owners will clear all or some of their debt with this cash,
although we have always been assured that Charles Jillings and
Duncan Saville were not about to recall their debt. However the
bond last year was trying to do just that.
#Post#: 5276--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: GP2110
Date: September 6, 2018, 4:02 am
---------------------------------------------------------
Oliool - Yes - if they took 50%, they would get 50% of the
profits. But, at present, as noted in the Tory article, there
were combined losses of around £28.5 million last year.
That is not new. For the last few years, there has been no
profit to share.
Moreover, everyone seems to be of a view that CVC would only be
interested if they saw a good return. So 50% of a good return is
better than a 100% of a debt, which is growing and which is
causing the clubs to be in financial turnover.
As regards the previous discussion re: Sky, they would only get
rights if they outbid BT. Either way, the more revenue from tv
rights, the better for the clubs financially.
#Post#: 5281--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: Quinten Poulsen
Date: September 6, 2018, 4:11 am
---------------------------------------------------------
--- Quote ---
> However, it seems that the CVC’s valuation of the league at
£550 million has left some club owners underwhelmed
--- End Quote ---
This is a bit bizarre.
#Post#: 5294--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: olipool
Date: September 6, 2018, 4:45 am
---------------------------------------------------------
--- Quote from: GP2110 link ---
>
> Oliool - Yes - if they took 50%, they would get 50% of the
profits. But, at present, as noted in the Tory article, there
were combined losses of around £28.5 million last year.
That is not new. For the last few years, there has been no
profit to share.
>
--- End Quote ---
I don't think that's quite right. The clubs as a whole are
making a £28.5m loss. But PRL (which is the thing they are
thinking of selling) is profitable. It pays dividends to the
clubs (i.e. it hands them their on 13th share of the TV rights
etc).
So by doing this they would be handing over something which is
currently of value to them.
OP
#Post#: 5297--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: deadlyfrom5yardsout
Date: September 6, 2018, 5:01 am
---------------------------------------------------------
Interesting thread with some intelligent contributions, thanks.
From my point of view, the minute it becomes too costly to
travel and watch the games I will happily become an armchair fan
utilising RugbyPass/ BT/Sky/Premiership TV or whoever and maybe
attend key games of my choice. I will still very much be a Quins
fan but able to afford a couple more Chambermaids.
#Post#: 5300--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: GP2110
Date: September 6, 2018, 5:27 am
---------------------------------------------------------
Oli - But PRL is (as far as I understand) 100% owned by the 12
Premiership clubs + Irish.
So even if PRL is profitable, those profits go straight to the
clubs and the dividends are reflected in the clubs 'figures.
The fact that all of the clubs are making losses, means that the
dividends are plainly not sufficient at present.
Alternatively, PRL is very profitable - but the clubs have
chosen not to draw the profits (in which case their losses are
artificial). That would make no sense to me.
#Post#: 5301--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: A222Quin
Date: September 6, 2018, 5:35 am
---------------------------------------------------------
--- Quote from: Quicker Quin link ---
>
> [quote author=A222Quin link=topic=364.msg5172#msg5172
date=1536140859]
> Yeah, if this happens I'm out and will probably head off to
watch the lower leagues.
>
--- End Quote ---
Why?
[/quote]
At the moment I feel that Premiership clubs are treading a fine
line between commercialism and running an accessible sport that
is still firmly rooted in the community and supplying players to
the England team. My concern is that if CVC get involved then
the links with all of those will be put under severe strain in
the search of profit. We'll end up with a situation much like
football or current F1.
I appreciate I'm being cynical but I just don't want to watch a
sport that is a commercial entity's play thing much beyond the
level it already is.
#Post#: 5303--------------------------------------------------
Re: Premiership Rugby to go private?
DIR By: olipool
Date: September 6, 2018, 5:56 am
---------------------------------------------------------
--- Quote from: GP2110 link ---
>
> Oli - But PRL is (as far as I understand) 100% owned by the 12
Premiership clubs + Irish.
>
> So even if PRL is profitable, those profits go straight to the
clubs and the dividends are reflected in the clubs 'figures.
The fact that all of the clubs are making losses, means that the
dividends are plainly not sufficient at present.
>
> Alternatively, PRL is very profitable - but the clubs have
chosen not to draw the profits (in which case their losses are
artificial). That would make no sense to me.
>
--- End Quote ---
What you say is right. Today they draw the profits and still
make a loss overall. The concern is that they sell half of
PRL, only get half the profit in future, and so make a larger
loss - unless the money paid by the buyer is well invested, to
grow the overall profit of PRL by more than double.
Which comes back to the original point of - will the clubs spend
that "jam today" money well, or will they just spank it...? I
know which one I suspect.
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